South Korea's central bank Friday froze its key interest rate for the eighth straight month Friday as signs of an economic recovery have yet to be conspicuous.

In a monthly policy meeting, the Bank of Korea (BOK) left the benchmark seven-day repo rate unchanged at a record low of 2 percent. The BOK lowered the rate by a total of 3.25 percentage points between October and February in a bid to put the brakes on a sharp economic free-fall.

"Inflationary pressure has been tamed and the local economy is not in a full-fledged recovery phase," Lee Sung-kwon, an economist at Shinhan Investment, was quoted as saying by Yonhap News Agency.

Economic indicators have fueled optimism that the South Korean economy, Asia's fourth-largest, is recovering at a faster-than-expected pace, raising market expectations that the central bank may hike the rate in the near future.

South Korea's industrial output rose for the second straight month in August. In September, Korea's exports stopped a 10-month run of double-digit annual declines.
Analysts said the question revolves around when the BOK will begin to shift its accommodative easing stance to a tight bias.

Tensions over a rate policy have flared recently between the BOK and the government, which has reiterated that it will stick to an "expansionary" economic stance as it is too early to say that the economy is making a full recovery.

Central bank Gov. Lee Seong-tae hinted on Sept. 10 that the bank may conduct a rate increase if housing prices continue to rise.

Some experts say the Australian central bank's unexpected rate hike could give some room for the BOK to raise borrowing costs as the move suggested the timing for implementing an exit strategy could differ depending on each country's economic fundamentals.