(Repeats to fix formatting)
* Base rate kept at 2.50 pct (Reuters poll: 2.50 pct)
* Most analysts see rate hike in late 2014
* C.bank governor sees firm recovery in global economy
* C.bank keeps 2014 GDP f'cast at 3.8 pct, sees 2015 GDP at
By Christine Kim and Se Young Lee
SEOUL, Jan 9 South Korea's central bank kept
interest rates steady and expressed confidence that the economic
recovery was on track, further dampening speculation of
additional policy easing despite the risks of the Federal
Reserve's stimulus tapering.
The Bank of Korea's monetary policy committee held its base
rate at 2.50 percent for an eighth straight month
by a unanimous vote, the central bank said on Thursday.
A Reuters poll of 26 analysts had found that all but one
expected policy to stay steady this month, as the central bank
waits to see how the Fed's reduction of its bond-buying
programme affects global financial markets and capital flows in
Policymakers are also keeping a cautious eye on the Japanese
yen on concern that the currency's weakness will hurt the
competitiveness of South Korean exports.
But most analysts expect the central bank to raise rates
late this year from their lowest level since early 2011, amid
growing signs that Asia's fourth-biggest economy is
strengthening and inflation is picking up.
"Compared with the past, I believe a lot of uncertainties
have cleared and I believe global growth forecasts will be
raised in the future," Kim Choong-soo, the central bank's
governor, told a news conference.
Kim said the Fed's decision to dial back its stimulus
reflected an improving U.S. economy and this would eventually
spell out better conditions for South Korea as well.
The won and Seoul shares showed little
reaction to the news but the lead three-year bond futures
contract extended declines, down 0.19 point at 105.57 as
of 0036 GMT, as investors that had been speculating about a
possible rate cut unwound their bets.
Bond futures had risen early this week after Goldman Sachs
predicted in a research report that the Bank of Korea would
deliver a surprise rate cut.
The won hit its highest level in more than five years
against the dollar and the yen last week, prompting talk of
possible government intervention in currency markets to help
Underlining the angst of exporters, Hyundai Motor Co's
chairman warned that the carmaker and affiliate Kia
Motors Corp expected their lowest annual sales
growth since 2003, as the weak yen aids Japanese rivals like
Toyota Motor Corp.
Yet South Korean exports have so far been resilient. They
rose a better-than-expected 7.1 percent in December from a year
earlier, underpinning economic momentum into the new
"We believe the weaker yen is being largely driven by better
U.S. demand, which suggests better external demand for Korea,
and is therefore neutral to Korean GDP growth," Kwon Young-sun,
an economist at Nomura, said in a research note.
Consumer sentiment also held steady at its highest since
early 2011 in December, reflecting increased confidence to among
households to spend.
Inflation remained at an average annual rate of 1.3 percent
in 2013, far below the central bank's inflation target band of
2.5 to 3.5 percent. But annual inflation is expected to reach
within the target in the second half of this year, Kim said.
Kim also released the central bank's latest growth and
inflation forecasts. South Korea's economy is expected to grow
3.8 percent this year, unchanged from its previous forecast made
in October, while inflation in 2014 is seen at 2.3 percent.
In 2015, the economy is projected to grow 4.0 percent and
inflation is seen at 2.8 percent.
(Editing by Chris Gallagher)