S. Korea's interest rate to reach 3.5 pct at yearend: ING Bank

SEOUL, May 20 (Yonhap) -- South Korea's central bank is expected to raise its key interest rate to 3.5 percent by yearend, ING Bank said Friday, citing the country's relatively low economic growth and slowing inflationary pressure.
The forecast is down from the Dutch lender's earlier forecast of 3.75 percent. A week ago, the Bank of Korea (BOK) froze the benchmark seven-day repo rate at 3 percent for a second month on lingering economic uncertainties.
ING Bank economist Tim Condon projected the BOK will likely carry out its final rate hike for the year in August.
The downgrade is based on an assessment that South Korea's economic growth is weaker than that of other Asian economies amid easing inflationary pressures, Condon said.
The South Korean economy, Asia's fourth-largest, is forecast to expand 4.7 percent on-year in 2011, compared with an 8.2 percent outlook for Asian countries excluding Japan, according to ING Bank data.
The economist also said increased production has helped to reduce South Korea's inflationary pressure stoked by soaring oil costs and food prices.
South Korea has been fighting mounting inflationary pressure. The country's consumer prices grew 4.2 percent in April from a year earlier, topping the upper end of the central bank's 2-4 percent inflation target band for four months in a row.
mil@yna.co.kr