S.Korea central bank holds emergency meeting

SEOUL (Reuters) - South Korea's monetary policy board holds an unscheduled meeting on Monday morning at which analysts expect it to cut interest rates and announce plans to buy bonds from local banks to pump liquidity into the squeezed economy.

If it does make an emergency cut -- and some analysts say it could be by as much as 50 basis points -- it be only the second such move since it introduced its current rate-setting system in 1999.

The first time was a half percentage point shortly after the September 11, 2001 attacks on the United States.

The Bank of Korea joined a global rate cut earlier this month, reducing its main interest rate by 25 basis points to 5 percent and some analysts said Monday would see another cut.

Separately, the central bank announced that it would allow commercial banks to provide foreign currency loans to exporters to help them settle foreign currency options and also let lenders further extend maturities for foreign currency loans.

Monday's meeting follows last week's sharp falls in share prices and the won, both dragged down by fears that the global financial storm is weakening South Korea's economic growth, already at a four-year low.

Many analysts are also expecting the central bank to announce measures to buy bonds from local banks which have been struggling with a domestic liquidity squeeze brought on by the global financial downturn.

If it does, it will be the first such measure by the central bank.

On Sunday, President Lee Myung-bak presided over an emergency meeting of top economic officials.