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Bank of Korea keeps base rate unchanged amid political challenges

Bank of Korea decided to leave the base rate unchanged at 1.25%, but said it is closely monitoring political uncertainties in the domestic and global fronts.

The central bank said Dec. 15 that it expects the global economy to maintain its moderate recovery going forward, while being affected by factors such as the direction of the new South Korean government's policies, the pace of monetary policy normalization in the U.S., the uncertainties related to Britain's exit from the European Union and the economic conditions in emerging markets.

The regulator also expects the domestic economy to sustain its trend of modest growth, in line with the recovery of the global economy, but added that downside risks have increased due to domestic and external uncertainties.

The decision also follows the National Assembly's motion to impeach President Park Geun-hye for breaching constitutional and criminal law to benefit a confidante, Choi Soon-sil.

Meanwhile, consumer price inflation remained at 1.3% in November amid the decline in petroleum product prices. Core inflation, excluding agricultural and petroleum product prices, dropped to 1.4% from 1.5% in October.

Looking ahead, the central bank forecasts consumer price inflation to gradually rise, mainly due to the effects of increases in international oil prices.