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The Bank of Korea on Thursday kept policy rates unchanged at a record low citing uncertainties about Covid-19 and modest inflationary pressures on the demand side although it now expects growth for the year to exceed its earlier forecast.

The bank maintained the base rate at 0.5%, as widely expected.

It also signalled its readiness to support the economy and stabilise inflation. "Consumer price inflation will run above the path projected in February and fluctuate for some time around 2%, before declining slightly. Core inflation is forecast to increase gradually to the 1% range," the bank said.

While the economic recovery would continue, led by exports and investment, uncertainties about the pace remain elevated, according to the statement. The bank now projects GDP growth this year to exceed the February forecast of 3.0%.

It said it would continue to conduct monetary policy to support the economy and "stabilise consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability."

The next policy meeting is scheduled for May 27.