SEOUL, May 9 (Reuters) - South Korea's central bank caught markets by surprise after it cut rates unexpectedly by 25 basis points to 2.50 percent as recovery in Asia's fourth-largest economy is taking longer than expected.
Following are key remarks from Bank of Korea Governor Kim Choong-soo at a news conference, translated by Reuters:
'There was one dissenter in Thursday's rate decision.'
'The government produced an extra budget since the last policy meeting, and the government and parliament are working together for economic recovery. It was desirable for the central bank to join the efforts.'
'We also had to consider changes in global financial markets and changes in policy rates of other countries.'
'Our rate cut also seeks to maximise the effects of the government's extra budget and prepare against changes in market interest rates stemming from the extra budget.'
'The global economy going forward will maintain a steady recovery pace but downside risks remain from the sluggishness of economies in the euro zone and other uncertainties.'
'The central bank maintains its view that the domestic economy will show a negative output gap for a considerable time due to factors such as the slow recovery of the global economy, the weakness of the Japanese yen and geopolitical risks in the country.'
'Compared to April, there have been no changes economy-wise.'
'Inflation will remain low for the time being as long as no unusual factors materialise.'
EFFECT OF RATE CUT:
'The effect of rate moves are usually seen in a year after they are made, but if the government's extra budget is used over the next six months as planned, the cut today and the budget will result in a boost of 0.2 percentage points to our expected growth rate for South Korea this year.'
'For next year, we see the domestic economy growing by 3.8 percent, and I expect the cut will have a boosting effect of roughly 0.3 percentage points.'
(Reporting by Christine Kim and Se Young Lee; Editing by Jacqueline Wong) Keywords: KOREA ECONOMY/RATES
(firstname.lastname@example.org)(822 3704 5665)(Reuters Messaging: email@example.com)
Copyright Thomson Reuters 2013. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.