S.Korea takes neutral stance toward further rate cut

South Korea's central bank on Friday showed its neutral stance toward further rate cut, citing both positive and negative factors facing the economy.

The Bank of Korea (BOK) decided to freeze the benchmark interest rate at 2.25 percent after cutting the rate by a quarter percentage point in August.

The BOK said in statement released after the rate-setting meeting that domestic economic activities have shown signs of gradual improvement, but it noted the pace of recovery has been moderate.

The bank said the South Korean economy is forecast to gradually improve in line with the global recovery, but it cautioned the delay in recovery of domestic investment sentiment may work as a destabilizing factor.

The BOK said in a separate statement that domestic demand improved somewhat from the contraction caused by the April ferry sinking disaster, but it noted the weak sentiment of economic agents has not clearly recovered.

It noted the negative output gap in the domestic economy will gradually narrow going forward, although its pace of narrowing would be moderate.

The negative output gap means actual GDP growth is below the one for potential growth. The narrowing of the negative output gap indicates the actual GDP growth nears to potential growth.