INSTANT VIEW 2-S.Korea c.bank keeps interest rate at 2.75 pct

SEOUL, Feb 11 (Reuters) - South Korea's central bank held interest rates steady on Friday after a surprise hike last month, in a move likely aimed at assessing the effect from the latest increase and the government's anti-inflation measures.

A media official at the Bank of Korea announced the decision by its monetary policy committee to leave the 7-day repurchase agreement rate unchanged at 2.75 percent after lifting it by 25 basis points last month.



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KEY POINTS

- For full story, double-click

- Thirteen out of the 21 analysts polled by Reuters expected the Bank of Korea to nudge the base rate up by a quarter percentage point, while the remaining eight respondents saw a hold this month.

- Story on January policy meeting



COMMENTARY:



LEE SEONG-HOON, SENIOR ANALYST, SAMSUNG SECURITIES

'We expected the central bank to increase rates this time. The biggest reason for the freeze may be that a back-to-back rise was considered too much pressure. Recent instability in financial markets could also be a factor.'

'The next increase is expected in March.'

'The bank will probably increase the rate to 3.5 percent by the end of the year.'



JEONG IMBO, FIXED-INCOME ANALYST, DAISHIN SECURITIES

'The BOK must have looked at the possible impact of a second consecutive rise on financial markets, household debt and consumer spending.'

'Considering those factors, it may feel comfortable taking a pause this month and signalling a rise in the following months.'

'We think consumer prices will shoot up further in the first quarter, so the central bank will raise interest rates in March and then pause.'



SUN YOO, ANALYST, WOORI INVESTMENT & SECURITIES

'Like many others, we had expected the BOK would increase rates.'

'The central bank seems to view current inflation as mostly cost-push driven on the supply side, not demand-led. While the government is preparing micro measures against inflation, it probably thought a rate rise would burden consumers more, along with heavy mortgage loans.'

'The central bank therefore decided to take a breather, and is seen raising rates in March. I think the BOK will raise rates to 3.75 percent by the end of this year, as the economic situation has recovered to that seen before the financial crisis.'



MARKET REACTION:

- March futures on 3-year treasury bonds reversed early losses to rise 0.09 points to 102.53 by 0114 GMT.

- The won erased early small gains to stand steady at 1,116.7 per dollar.

- Seoul stocks edged 0.03 up percent at 2,009.01 points



LINKS:

- Full statement from the Bank of Korea available later in Korean and English at http://www.bok.or.kr

- For all South Korean news and data, 3000 Xtra users can double click



BACKGROUND:

- Annual producer inflation in January quickened to a 26-month high of 6.2 percent, while annual consumer inflation for the month rose more than expected to a 3-month high of 4.1 percent.

- Exports in January spiked 46.0 percent to a record $44.89 billion from a year earlier, beating forecasts and following a revised 22.6 percent rise in December.

- The government expects consumer price inflation to stay at around 4 percent throughout the first quarter but start easing back from the second quarter.

(Reporting by Kim Yeon-hee, Yoo Choonsik, Cho Mee-young and Yerim Kim; Editing by Jonathan Hopfner)

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