Bank of Korea freezes base lending rate

SEOUL, March 7 (UPI) -- The Bank of Korea froze its key lending rate at 5 percent Friday in an attempt to put the brakes on inflation.

The lending rate banks use for overnight loans to each other -- called the base rate -- has been at 5 percent since August, Yohnap reported.

"There is a high possibility that the Korean economy's growth rate would slow down the road while consumer prices would face upward pressure. The country's current account balance could deteriorate," Bank of Korea Gov. Lee Seong-tae said at a news conference.

"Inflation is likely to remain stubbornly high for the time being due to burdens of soaring oil and raw material costs," he said.

The rate freeze was widely expected.

On its balance sheets, South Korean exports rose a 20.2 percent in February over February 2007, a critical factor in a country where exports amount to 40 percent of the economy. January's industrial output rose 11.8 percent above a year ago. But inflation has come in above the bank's target rate of 2.5 to 3.5 percent for three months running.

In February, the consumer price index rose 3.6 percent, the report said.