The Bank of Korea (BOK) held steady the benchmark seven-day repo rate, the rate at which the central bank lends to commercial banks, at 3.25 percent for August.

Analysts said fears of a US economic downturn and Europe's debt woes prevented the central bank from hiking the rate despite mounting inflationary pressure.

Consumer prices rose 4.7 percent in July from a year earlier, quickening from 4.4 percent growth in June.

"Last week's US credit rating downgrade and jitters in global financial markets seemed to warrant a rate freeze this month," Ma Ju-ok, an economist at Kiwoom Securities Co, said before the decision.

"It may be difficult for the key rate to reach beyond 3.5 percent by year-end," he told Yonhap news agency.

Shin Dong-Jun, a fixed-income analyst at Dongbu Securities Co, said growing economic uncertainties are raising downside risks.

"An economic slowdown and a fall in oil prices would ease inflationary pressure, so the BOK is likely to freeze the key rate through the end of this year," Shin said.

Copyright AFP (Agence France-Presse), 2011