South Korea central bank holds rates, news conference awaited

SEOUL (Reuters) - South Korea's central bank held interest rates steady for an 11th consecutive month, as expected, at the new governor's debut policy meeting, with markets pricing in rates being raised from late 2014.

The Bank of Korea's monetary policy committee, which Governor Lee Ju-yeol chaired for the first time, kept the base rate unchanged at 2.50 per cent, matching the unanimous forecast from a Reuters poll of 31 analysts.

Seoul markets showed a muted reaction to the expected decision as traders waited for the first policy news conference from 11:20 a.m. (0220 GMT) by Lee, a career technocrat who had served the bank for 35 years until early 2012.

"Recent economic data suggest that trade has started to pick up and, in turn, Korea remains on track for an export-led recovery. But the momentum is low: export growth slowed in Q1,"said Ronald Man, economist at HSBC in Hong Kong. He added that a rate cut would only come when growth faces a severe slump.

The Bank of Korea will also be revising its economic forecasts later in the day, and it currently projects the local economy will grow by 3.8 per cent this year, led by exports and consumption, compared to 3.0 per cent growth posted in 2013.

Data showed last week improvements in advanced economies boosted exports by an annual 5.2 per cent in March, up from a 0.7 per cent gain for the January-February period, which is often combined to mitigate distortions from Lunar New Year holidays.

Although a slowdown in China still remains a concern, growth picking up in the United States and the European Union is expected to keep demand strong for South Korean goods.

Sales at South Korea's top department and discount stores also improved in March over February, indicating South Korea's recovery seems to be on track.

Housing prices maintained their rising trend in March, gaining for a seventh month in a row and by the fastest pace in 28 months, data earlier this month showed.

Inflation still remains low and out of the bottom line of the central bank's 2.5 to 3.5 per cent target band, although core inflation rose 2.1 per cent in March, hinting headline inflation may soon follow suit.

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