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Bank of Korea keeps base rate at 1.25%

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Bank of Korea keeps base rate at 1.25%

Bank of Korea on Oct. 19 kept its base rate at 1.25% as it considers whether to follow the monetary tightening of the U.S. or maintain a loose monetary policy to boost its economy, Reuters reported.

With the latest decision, the central bank has kept the key rate on hold since June 2016, the longest period in which its monetary policy remained unchanged.

Central bank policymakers worry that continued hikes in Fed rates may lead to capital outflows from South Korea due to risks surrounding North Korea.

South Korea's economy grew 2.7% in the second quarter on an annual basis after a 2.9% expansion in the first quarter. The central bank said the economy is likely to expand 3% in 2017, higher than the 2.8% forecast made in July, as the global economic recovery has improved and financial markets are generally stable, said Bloomberg News.

Governor Lee Ju-yeol has hinted since June that the next policy change will be a rate increase if there are no doubts about the economic recovery, said Bloomberg.