South Korea's central bank is expected to stand pat on the base rate in November while chances of a rate cut linger in the coming months to bolster growth and cope with shifts in monetary policies at major economies, analysts said Monday.

All 12 analysts surveyed by Yonhap Infomax, the financial news arm of Yonhap News Agency, forecast the Bank of Korea (BOK) to keep the base rate on hold at an upcoming policy board meeting Thursday.

South Korea's seven-day repo rate currently stands at a record low of 2 percent, following two quarter percentage point rate cuts in August and October that were largely aimed at supporting the government's stimulus drive.

Analysts said while a weakening Japanese yen and sluggish domestic demand have raised hope for an additional rate cut, the central bank is unlikely to vote for the option for a second straight month.

In an unexpected move late last month, Japan's central bank announced its plan to push for further quantitative easing, sending the Japanese currency skidding. A weakening yen is seen to erode the price competitiveness of local exporters that compete with Japanese manufacturers.

The move, coupled with government officials' remarks on the weakening yen, had stoked views the BOK may use its policy instrument to deal with the currency issue.

"While there is market anticipation for a rate cut, time is needed to gauge the policy impact of the October rate cut. Given that domestic demand is in a recovery phase and the BOK's growth estimate is at the mid-3 percent level, a rate freeze is likely," said Hong Jung-hye, an analyst at Shinyoung Securities.

Hong, who forecast the central bank would consider hiking the base rate in the fourth quarter of next year, said that current economic indicators and recent comments by BOK Gov. Lee Ju-yeol point to a rate freeze but added that market watchers should keep their eyes on whether the vote will be unanimous. 

Following the October rate decision, the top central banker told reporters that the current 2 percent level is not insufficient to boost economic recovery, implying an additional rate cut is unnecessary for the time being.

Lee Han of Shinhan Financial Group said the BOK is likely to stand pat on the base rate for the time being amid risks of the country's 1,040 trillion won (US$958 billion) household debt and market volatility stemming from the U.S. Federal Reserve's exit strategy.

With the Fed poised to normalize its rate policy, there have been concerns that a narrowing rate gap that stems from a rate cut may trigger offshore investors to leave the local financial market.

Some analysts, however, forecast the central bank will take action in the first quarter of next year to further bolster growth and dampen the impact of the weakening yen.

The poll showed that three of 12 analysts projected the base rate to stand at 1.75 percent by the end of March, while one forecast the base rate to reach 1.5 percent in the cited period.

"Chances of an additional rate cut are rising amid further easing by the Bank of Japan and the European Central Bank. Low consumer inflation and slow economic recoveries are also factors for a rate cut," said Kiwoom Securities analyst Ma Ju-ok, projecting a rate cut in the first quarter.

Kong Dong-rak, a fixed income analyst at Hanwha Investment & Securities, also forecast the base rate to fall below the current 2 percent level amid "growing concerns over a currency war or a policy war."

"The BOK is likely to vote for a rate freeze at the November policy meeting. But still, there may be a verbal intervention through comments that authorities are closely observing the foreign exchange market," he said. (Yonhap)