South Korean interest rate unchanged

SEOUL, June 12 (UPI) -- The South Korean central bank, concerned about rising inflation, Thursday left its key interest rate unchanged at 5 percent for the 10th consecutive month.

Bank of Korea Gov. Lee Seong-tae warned that inflation, which rose to a seven-year high of 4.9 percent in May, may rise further in June, despite a slowing economy. The bank wants inflation to remain between 2.5 and 3.5 percent this year.

The bank's decision to keep the seven-day repurchase agreement rate or the base rate unchanged was widely expected, Yonhap news agency reported.

"If the upturn of oil prices eases, inflation may slow toward the end of this year but as oil and raw material costs are rising beyond our expectations, there is increasingly high uncertainty surrounding the movement of inflation," Lee said. The weaker won against the U.S. dollar was adding to the pressure.

"The BOK is expected to freeze the rate until the end of this year as it is facing conflicting risks of higher inflation and a slowing economy," one economist told Yonhap.

Last month, Lee said the Korean economy may grow 4.5 percent or less this year, down from the previous forecast of 4.7 percent.