SEOUL: South Korea’s central bank unexpectedly held interest rates steady in order to give it time to assess whether a euro-zone bond-buying program will help allay Europe’s financial crisis, although analysts said it still had room to cut interest rates this year.

Instead the Bank of Korea said it would provide 1.5 trillion won ($ 1.33 billion) to local banks for five years from next month, based on which low-income, small business owners could get loans at low interest rates.

The Bank of Korea’s monetary policy committee held its base rate steady at 3.00 percent, a media official said without elaborating. Governor Kim Choong-soo is expected to hold a news conference from 11:20 a.m.

Bond futures fell while the won pared early losses against the dollar but the impact on markets as a whole was limited as traders awaited more details on the decision and the future policy from a news conference.

Treasury bond futures fall sharply after the decision while the won turned higher against the dollar. Stock prices howed a muted reaction.

Eighteen out of the 21 analysts polled by Reuters had predicted a 25 basis-point cut. The central bank trimmed the rate in July for the first time in more than three years and then left it unchanged in August.

Most analysts had expected the central bank to cut the rate once again, if not yesterday then later, and then stay on hold at least for the rest of the year while watching developments in Europe and the effect of policy measures around the world.

Recently, most central banks have left their policy untouched in recent weeks to assess developments in the euro zone and the economic performance elsewhere, with the exception of the Swedish and Brazilians who cut their rates.

South Korea’s export-reliant economy, the fourth-largest in Asia, slowed to quarterly growth of 0.3 percent in the April-June period from 0.9 percent in the previous three months as capital investment collapsed.

The slump was deepening in the current quarter as combined exports in July and August fell by 7.6 percent from a year earlier and sales at top department and discount stores shrank simultaneously year-on-year for the last three months in a row.

South Korea’s annual inflation slowed to a fresh 12-year low of 1.2 percent in August, providing further evidence of cooling domestic demand and allowing the central bank to cut interest rates when it needs to spur domestic spending.