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S. Korea keeps interest rates steady at 3 percent in surprise announcement

SEOUL -- South Korea's central bank kept its key interest rate unchanged at 3 percent Thursday, defying expectations that it would take advantage of low inflation to announce an economy-boosting cut.

The Bank of Korea froze its key rate for the second month in a row, having trimmed the rate in July by 25 basis points, in its first policy easing since early 2009.

The July cut coincided with government efforts to reverse a slowdown in the South Korean economy which has struggled with an export slump caused by a weak U.S. economy and the prolonged eurozone debt crisis.

Market analysts had been expecting a further 25 basis point reduction Thursday on the back of government data showing inflation at a 12-year low of 1.2 percent in August and unemployment holding steady at 3.1 percent.

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