The announcement by Bank of Korea Gov. Kim Choon-soo came on signs of improvement in the global economy and despite a stronger won.
The South Korean economy is Asia's fourth largest after that of China, Japan and India. Its central bank last cut the repo rate in October 2012.
The bank governor said the economy is not likely to deteriorate further, although downside risks persisted such as possible fiscal tightening by advanced economies and Japan's expansionary policy, Yonhap News reported.
Yonhap quoted analysts as saying the latest move follows signs of recovery in the U.S. and Chinese economies and that a rate cut was not seen as being effective in checking the won's appreciation.
"It is more likely for Korea to unveil stronger rules to stem currency volatility, including a tax on financial transactions. And North Korea's latest nuke test is not seen as a factor in changing the rate policy," one analyst told Yonhap.
The Korean gross domestic product grew 2 percent in 2012, a three year low. However, it is widely expected to recover in the second half of this year after bottoming out late last year.
President-elect Park Geun-hye will be sworn in on Feb. 25. She has pledged to support smaller firms and help debt-laden households, Yonhap reported.
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