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South Korea's central bank reiterated its worries about U.S. quantitative easing and the possible economic slowdown in China, citing those as major downside risks facing the economy.
"In terms of future growth path, there are both upside risks such as accelerating economic growth in the United States and Japan, and downside risks related to the possible economic slowdown in China and the heightening uncertainties over the U.S. exit strategy," Bank of Korea (BOK) said Thursday in a statement unveiled after freezing its policy rate at 2.5 percent.
The statement came amid escalating concerns over an early exit of U.S. quantitative easing caused by comments by several Fed officials.
Atlanta Fed President Dennis Lockhart said Tuesday that the Fed 's initial tapering of its bond purchases could be launched at any of its three remaining monetary policy meetings this year. Chicago Fed President Charles Evans said he would not rule out the Fed's scaling back of its monetary stimulus in September.
The central bank, however, noted that the South Korean economy would maintain its recovery trend, saying that the negative output gap for the economy will gradually narrow. The negative output gap means actual GDP growth stays below the one for potential growth.
South Korea's real GDP expanded 1.1 percent in the second quarter from three months earlier. The reading was the highest since 1.3 percent tallied in the first quarter of 2011, beating market consensus of 0.8 percent.
