SEOUL, Aug. 30 (Xinhua) -- South Korea's central bank on Friday froze its policy rate to wait and see the effect from last month's rate cut.
Bank of Korea (BOK) Governor Lee Ju-yeol and six other policy board members decided to leave the benchmark seven-day repurchase rate unchanged at 1.50 percent.
It was in line with market expectations. According to a Korea Financial Investment Association (KFIA) survey of 200 fixed-income experts, 78 percent predicted the rate on hold.
The rate freeze decision came after the BOK lowered the target rate last month by a quarter percentage point to the current 1.50 percent as part of efforts to tackle the negative effect from the global trade dispute and the trade spat between Seoul and Tokyo.
Japan on Wednesday enforced its decision to remove South Korea from its whitelist of trusted trading partners that are given preferential export procedure. Seoul also dropped Tokyo off its whitelist of trusted export partners earlier this month.
The Seoul-Tokyo trade friction was sparked by Japan's tighter control early last month on its export to South Korea of three materials vital to produce memory chips and display panels, the mainstay of the South Korean export.
Japan's export curbs added uncertainty to the already-struggling South Korean economy, stemming from the global trade dispute that driven the South Korean export into sliding for the eighth consecutive month through July.
Sentiment among local businesses over economic conditions worsened to the lowest in six months on rising worry about global economy.
The government unveiled the largest-ever budget plan for 2020 worth 513.5 trillion won (422 billion U.S. dollars) in a bid to help boost economic growth and tackle the effect from trade dispute with Japan.
It was an 9.3-percent increase from this year's budget worth 469.6 trillion won (386 billion U.S. dollars), which grew 9.7 percent from the previous year.
The country's real gross domestic product (GDP), adjusted for inflation, expanded 1.1 percent in the second quarter on a quarterly basis, after surprisingly skidding 0.4 percent in the first quarter.
The BOK slashed this year's growth forecast for the economy from 2.5 percent to 2.2 percent, while the government lowered its growth target by 0.2 percentage points to a range of 2.4 percent to 2.5 percent.
Amid the sullen growth outlook, the BOK was expected to cut its benchmark rate further to the all-time low of 1.25 percent as early as the next rate-setting meeting on Oct. 16.
Economic indicators showed a mixed picture. Employment in July gained 299,000 from a year earlier, but the jobless rate rose 0.2 percentage points to 3.9 percent last month.
Production in all industries grew 1.2 percent in July from a month earlier, turning around for the first time in three months. Output in the manufacturing and mining industries advanced 2.6 percent last month, marking the fastest increase in 32 months.
Retail sales, which reflect private consumption, declined 0.9 percent in the month, continuing a downward trend for the second consecutive month.
Facility investment grew 2.1 percent last month, but completed construction diminished 2.3 percent.