The Bank of Korea on Thursday froze the key rate at 2.75 percent for two months in a row, choosing to take more time to watch the policy effect of the rate cuts in July and October.

With the presidential election only five days ahead, the central bank also feels the need to wait for the new administration’s economic policy directions.

The benchmark seven-day repo rate was raised by a quarter percentage point to 3.25 percent in June last year and was kept there for another 12 months until last July. The central bank cut the rate to 3 percent in July and again to 2.75 percent in October, pulling it down to the 2-percent range for the first time in 20 months.

BOK Gov. Kim Choong-soo and his six fellow members of the monetary policy committee took note of the rebound in Korea’s exports from its low in the third quarter as well as improving economic indicators in the U.S. and China.

They are also awaiting the results of the U.S. “fiscal cliff” negotiations three weeks later to consider major developments in the world’s largest economy.

The governor said that the fourth-quarter growth may be lower than the BOK’s earlier estimate of 0.8 percent, indicating that the full-year growth would miss the bank’s 2.4 percent outlook.

“I cannot say that the Korean economy might deteriorate further, but it is also difficult to anticipate a fast recovery,” Gov. Kim told a press conference.

If Asia’s fourth-largest economy loses its momentum for recovery due to the won’s steep gain against the U.S. dollar, for example, the BOK is likely to lower the policy rate early next year.

Poor indicators of the real economy in October and November such as falling consumption and service output across all sectors except for mining, many observers say that a rate cut is just a matter of time.

The nation’s GDP in the three months to September grew only 0.1 percent from the previous quarter, heightening concerns that Korea is yet to get past its trough.

“The BOK is expected to adjust the rate in January after taking the fourth-quarter growth into account,” said Yeom Sang-hoon, a researcher at SK Securities.

The monetary policy committee said it “expects the global economy to exhibit a modest recovery going forward, but judges the downside risks to growth to be large, owing chiefly to the euro area fiscal crisis and to the fiscal consolidation issue in the U.S.

“In Korea, the committee appraises economic growth to have remained at a weak level, with exports improving but the sluggishness in domestic demand continuing,” the committee said in a statement.

By Kim So-hyun (sophie@heraldcorp.com">sophie@heraldcorp.com)