Foreign IBs eye rate freeze until Q2

SEOUL, Oct. 3 (Yonhap) -- Major foreign investment banks believe that South Korea's central bank would freeze its key interest rate at least until the second quarter of next year because of mounting concerns over external economic uncertainties, data showed Monday.
The Bank of Korea (BOK) froze the benchmark rate at 3.25 percent in September for the third straight month as signs of the slowing global economy and eurozone debt crisis outweighed persisting inflation woes.
Foreign investment banks, including Barclays Capital, Citigroup and Morgan Stanley, forecast that the BOK is likely to stand pat on the rate until the second quarter as inflation risks are likely to weaken compared with rising concerns about economic growth, according to the Korea Center for International Finance.
Citigroup said that despite lingering inflation risks, it is difficult to ignore a possible expansion of external uncertainties.
Morgan Stanley said concerns over economic growth are expected to dwarf inflation woes, citing a 2.7 percent inflation outlook for next year.
The two financial firms also said there is a possibility the central bank may freeze the benchmark rate in the third quarter of next year as well.
Barclays Capital, however, said it is difficult to rule out a rate hike this month if policymakers decide to raise the key rate to clamp down on rising inflationary pressure stemming from the Oct. 26 local by-elections.
Meanwhile, JP Morgan projected a quarter percentage point rate hike to take place this year or during the January-March period next year. The financial firm said the benchmark rate is likely to reach 3.75 percent in the second quarter.
The BOK is scheduled to hold its rate decision meeting on Oct. 13.