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S Korea cuts growth forecast, freezes interest rate

South Korea's central bank revised its economic growth outlook for 2014 down to 3.8 per cent Thursday, while keeping its key interest rate unchanged for a 14th straight month.

SEOUL: South Korea's central bank revised its economic growth outlook for 2014 down to 3.8 per cent Thursday, while keeping its key interest rate unchanged for a 14th straight month.

The Bank of Korea (BoK) froze the rate at 2.5 per cent, but governor Lee Ju-yeol said the decision was not unanimous.

The Monetary Policy Committee forecast the global economy would sustain its "modest recovery," but downside risks include a US exit from its stimulus programme and weakening economic growth in some emerging markets.

While South Korean exports have held strong, domestic demand has slackened "due largely to the impacts of the Sewol ferry accident", the bank said in a statement.

The Sewol sank on April 16 with the loss of around 300 lives, triggering an extended period of national mourning.

The BoK said it was cutting back its growth outlook for 2014 from 4.0 per cent to 3.8 per cent.

Consumer price inflation remained at 1.7 per cent year-on-year in June, as in May, but the committee forecast a gradual rise in the months to come.

In May, the state-run think tank Korea Development Institute cut its growth outlook for this year from 3.9 per cent to 3.7 per cent, citing negative impacts on consumption from the ferry disaster.

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