SEOUL South Korea's central bank chief said on Saturday that monetary policy should stay accommodative for a considerable period of time, as concerns grow that a recovery in Asia's fourth-largest recovery may be losing steam.
"It would be appropriate for monetary policy to remain accommodative for a considerable period of time, as inflationary pressure from the demand side isn't expected to be big even as inflation would increase with rising oil prices, while the pace of growth will be steady," Governor Lee Ju-yeol said in a New Year speech.
The bank has kept its benchmark interest rate steady at a record low of 1.25 percent for six straight meetings as authorities sit tight in the face of a political crisis at home and the U.S. Federal Reserve's signal of further rate increases next year.
The central bank sees inflation at 1.9 percent in 2017, up from 1 percent seen for this year.
South Korea's government lowered its growth outlook for next year on Thursday as it saw weaker domestic demand and waning job growth holding back a recovery.
The government now sees economic growth of 2.6 percent in 2017, down from its earlier estimate of 3 percent, and below the Bank of Korea's 2.8 percent forecast, the finance ministry said.
(Reporting by Cynthia Kim; Editing by Kim Coghill)