Despite growing pressure for a rate cut, South Korea's central bank is expected to hold steady on growing concerns over household debt and delay any move until next month when it releases the latest economic outlook, analysts said Monday.

Fourteen of the 18 analysts surveyed by Yonhap Infomax, the financial news arm of Yonhap News Agency, projected the Bank of Korea (BOK) to keep the base rate unchanged at its policy meeting scheduled for Thursday. If the forecast is on track, it will extend the BOK's wait-and-see approach to a fifth consecutive month with the key rate standing at a record-matching low of 2 percent.

The analysts said that while economic growth remains tepid, the BOK is likely to wait until next month when it announces its revised economic outlook to cut the key rate by a quarter percentage point to 1.75 percent.

"The most likely scenario is that the BOK will move in April when releasing the next economic outlook update. Board members have just raised concerns over the expansion of household debt at February's meeting. Rate cuts may not come so soon in March," said Ma Tieying, an economist with DBS in Singapore.

Household debt has been growing at an alarming pace in South Korea as home buyers rushed to get loans amid the low-rate environment. Outstanding household loans reached 1,029.3 trillion won (US$927.8 billion) as of end-December, pushing overall household debt to a record high of 1,098 trillion won, according to BOK data.

BOK Gov. Lee Ju-yeol has addressed the graveness of the issue.

In a press conference following the February decision, Lee said sharp household debt growth was among the key factors that prompted the monetary policy committee "to hold the base rate to see where downside and upside macroeconomic risks go." Board members supported the rate freeze with unanimous votes in the past four months.

Four analysts, however, bet on a rate cut this month, citing growing concerns over deflation.

"There is a need for an additional easing to bolster export competitiveness and trigger inflation. Household debt should be dealt with through microeconomic policies rather than being linked with monetary policies," said Seo Hyang-mi, an analyst at HI Investment & Securities.

Consumer prices edged up 0.5 percent on-year in February, growing less than 1 percent for a third month in a row and marking the slowest growth since July 1999.

While dismissing concerns over deflation, Finance Minister Choi Kyung-hwan recently voiced concern over "mounting worries of the economy slipping into a state of deflation as consumer prices have stayed near zero percent in recent months."

Still, a bulk of analysts, 11 out of 17, projected the BOK to cut the base rate in the second quarter to spur growth, with the BOK most likely to take action next month when updated economic forecasts are due.

"Since it seems difficult to achieve the central bank's first-quarter growth forecast of 1 percent, minority votes (for a rate cut) may emerge in March. The actual rate cut is likely to take place in April in line with a downward revision on growth," said KDB Daewoo Securities analyst Yoon Yeo-sam.

Six analysts, however, forecast the central bank to keep the base rate unchanged for the time being and wait for the Fed's move to start its rate hike.

"We forecast the base rate to stay on hold for a considerable time. While consumer prices are falling, policymakers will attribute it mostly to a fall in oil prices," said Hong Jung-hye, an analyst at Shinyoung Securities, projecting the key rate to remain unchanged until the end of this year or early next year. (Yonhap)