Bank of Korea (BOK) Governor Rhee Chang-yong and other monetary policymakers decided to leave the benchmark seven-day repurchase rate unchanged at 3.50 percent.
It was in line with market expectations. According to the Korea Financial Investment Association's poll of 100 fixed-income experts, 90 percent predicted the rate freeze this month.
The BOK had put the rate on hold in February, April, May, July and August after delivering interest rate hikes by 3.0 percentage points between August 2021 and January 2023.
The consecutive rate freeze came on the back of rising concerns about economic slowdown, affected by soft global demand for locally-made products and higher borrowing costs that roiled the real estate market.
Export, which accounts for about half of the export-driven economy, continued to fall for the 12th successive month through September.
Production in the manufacturing industry grew 5.6 percent in August from a month earlier, while the manufacturing inventory advanced 4.0 percent in the month on higher inventory in chips and cars.
Retail sale, which reflects private consumption, declined for the second straight month through August on a monthly basis.
The BOK said in a statement that uncertainties over the economic outlook were judged to be elevated, affected by heightened geopolitical risks and by the prolongation of restrictive monetary policy stances in major economies.
Higher borrowing costs increased the debt-servicing burden for households struggling with record-high debts that would negatively influence the already faltering property market.
Debts owed by households to deposit-taking banks kept an upward trend for the sixth consecutive month to reach a new high in September due to the supply of government-backed mortgage loans and the moderated regulations to prop up the real estate market.
Geopolitical risks in the Middle East raised worry about volatility in the global crude oil price.
Dubai crude, South Korea's benchmark, averaged 93.25 U.S. dollars per barrel in September, up 7.9 percent from a month earlier.
The country's consumer prices rose 3.7 percent in September from a year earlier, marking the highest in five months.
The consumer price inflation had roughly been on the decline after peaking at 6.3 percent in July last year.
Inflation expectations, which measure the outlook among consumers over headline inflation for the next 12 months, fell this year from 4.0 percent in February to 3.7 percent in April, 3.5 percent in June and 3.3 percent in September.
The BOK said although inflation was projected to continue its underlying trend of slowdown, uncertainties over the future path of inflation rose significantly.
Expectations remained for the BOK to hike rates amid the still high inflation and a broader gap between the South Korean and the U.S. interest rates.
The consumer price inflation of 3.7 percent in September surpassed the BOK's midterm inflation target of 2 percent.
The U.S. Federal Reserve lifted its target range for the federal funds rate by 25 basis points to 5.25-5.50 percent in July, indicating one more possible rate hike by the end of this year.
The Fed's rate hikes put the BOK on alert as the belated response may force foreign funds out of the South Korean financial market, and excessively cut the value of the domestic currency versus the greenback.
The local currency's depreciation would increase import costs for raw materials, putting inflationary pressure on the domestic economy.
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