* BOK keeps rates at 1.25 pct (Reuters poll 1.25 pct)
* Fed rate hike, political scandal stays BOK hand
* Majority of analysts see BOK staying pat for a while
* Narrowing rate gap with US
(Updates after governor's press conference)
By Christine Kim and Cynthia Kim
SEOUL, Dec 15 South Korea's central bank held
its key policy rate steady at a record low of 1.25 percent on
Thursday, as authorities sit tight in the face of a political
crisis at home and the U.S. Federal Reserve's signal to raise
rates at a faster-than-expected pace.
The Bank of Korea flagged growing risks for the
export-reliant economy that some analysts feel should be
tempered through another rate cut, but the BOK faces a dilemma
as further easing could spark destabilising capital flows toward
higher yielding U.S. dollar-based assets.
"There is a risk that cutting interest rates at a time when
the Fed is in the middle of a tightening cycle could lead to
disruptive capital outflows," said Krystal Tan, Asia economist
at Capital Economics.
The Fed's rate rise of 25 basis points to 0.50-0.75 percent
was well flagged but the "dot plots" of Federal Open Market
Committee members' projections showed a median of three hikes
next year, up from two previously, leaving investors scrambling
to adjust positions.
That meant the rate gap between the United States and Korea
will continue to narrow, making another BOK cut an unpalatable
prospect given the risks of capital outflows.
BOK Governor Lee Ju-yeol, however, took pains to underscore
that the Fed wasn't the lone factor in its policy deliberations.
"I have repeatedly said this but we look at the entire
picture of the economy, and not just the Fed," Lee told
reporters soon after the rates were held steady for the sixth
month in a row.
POLITICAL RISKS, TRUMP FACTOR
Risks at home have grown as a political crisis has embroiled
President Park Geun-hye and raised fresh risks for Asia's
Lee declined to say whether the Park scandal was a bigger
risk to the economy than offshore headwinds, but emphasised that
policymakers will be focused on improving gloomy sentiment.
Park looks set to lose her job after lawmakers
overwhelmingly voted to impeach her last week over an
The Park scandal has threatened to derail many investment
and business decisions at conglomerates, especially as a
parliament probe has ensnared leaders of companies from Samsung
Electronics to Lotte Group to SK Group.
"Political uncertainties seem to be a bigger risk here for
companies than external factors related to Fed's policies and
Trump administration," Park Sang-hyun, an economist at HI
Investment & Securities said.
"The BOK will stay on hold throughout 2017 due to such
political uncertainties and household debt."
South Korea's economic recovery has stuttered over the past
two years in the face of slack global demand and tepid private
The collapse of Hanjin Shipping Co Ltd, and a
fire-prone smartphone being cancelled at Samsung Electronics Co
Ltd have put additional strain on growth.
U.S. President-elect Donald Trump also poses a risk for
Korea, especially if his campaign protectionist rhetoric finds
policy traction - derailing South Korea's exports which have
only recently started to find their footing.
South Korea in recent months has seen a spike in capital
outflows on expectations of higher interest rates in the U.S.
and Trump's election upset, drawing a quick response from Seoul
to act to stabilise any market disruptions.
Offshore investors reduced their bond holdings by a net
1.798 trillion won ($1.54 billion) in November, offloading for a
fourth month in a row.
(Editing by Shri Navaratnam)