SEOUL (Bloomberg) -- South Korea’s central bank will probably keep its benchmark interest rate unchanged for an eighth month as its board weighs the risk of accelerating inflation versus slowing economic growth.

Bank of Korea Governor Lee Seong Tae and his colleagues will leave the seven-day repurchase rate at 5 percent on April 10, according to all 18 economists surveyed by Bloomberg News. The bank last changed the policy rate when it delivered the first back-to-back increases in July and August.
Soaring raw material costs have pushed prices beyond the central bank’s target range in recent months just as slowing global growth threatens to cool demand for Samsung Electronics Co.’s mobile phones and Hyundai Motor Co.’s cars. President Lee Myung Bak said this week he’s concerned that domestic demand may weaken too much and asked ministers to find ways to spur growth.
“The Bank of Korea faces an increasingly tough mix of rising price pressures amid evidence of slowing economic growth,” said Frederic Neumann, an economist at HSBC Global Research in Hong Kong. “We therefore expect the central bank to remain on hold for now, but rates should still come down 50 basis points by late 2008.”
President Lee’s plea comes as South Koreans prepare to vote in legislative elections yesterday amid polls that show a decline in support for his party.
If his party fails to win a majority of seats, he may face the same fate as his predecessor, Roh Moo Hyun, who didn't control the legislature and wasn’t able to enact his programs.
--------------Inflation pressures
Rising commodity and food prices are making it difficult for the Bank of Korea to achieve its goal of keeping inflation between 2.5 percent and 3.5 percent, on average, for the three years to 2009.
Producer prices rose 8 percent in March from a year earlier, the biggest increase in more than nine years in March, the Bank of Korea said on Wednesday in Seoul.
Consumer prices jumped 3.9 percent in March from a year earlier, the fastest pace in three years.
Asia’s fourth-largest economy is also showing mixed signals as exports remain strong and other indicators suggest a slowdown, according to the latest government data.
Export growth unexpectedly accelerated in March, while factory output fell for the second time in three months in February.
-----------------Weakening growth
“The economy looks likely to have entered a slowdown in the first quarter,” said Kwon Young Sun, a Hong Kong-based economist at Lehman Brothers Holdings Inc. “Policy makers could soon start to focus more on weakening growth rather than high consumer-price inflation.”
Consumer confidence plunged to the lowest in a year in March and retail-sales growth slowed in February.
President Lee last week named three university professors to join the central bank’s board to replace members whose terms end on April 20.
The new members may be more likely to support the president’s drive for economic growth, increasing the chances for interest-rate cuts in coming months, Neumann said.
The replacements come as tensions between the government and the central bank rise over the direction of interest rates.
Finance Minister Kang Man Soo is calling for a rate cut to spur economic growth. Governor Lee says it’s premature.