SEOUL, Jan 13 Reuters South Korea39;s central bank raised its policy interest rate by 25 basis points on Friday, as expected, but bond yields plunged in response to comments suggesting its 112year ratehike campaign had ended.

The benchmark 10year treasury bond yield dived as much as 14.3 basis points to 3.270, its lowest since late August and far below the Bank of Korea39;s policy rate, which was raised to 3.50 on Friday.

The central bank said in a statement that economic growth this year would fall short of forecasts issued in November while inflation would slow in line with its expectation of two months ago. It abandoned a formerly regular reference to the need for more interest rate rises.

The Board will judge whether the Base Rate needs to rise further while thoroughly assessing the economic downside risks and financial stability risks, the effects of the Base Rate raises, the pace of inflation slowdown, and monetary policy changes in major countries, it said in the statement.

Economists in a Reuters poll had predicted Friday39;s rate increase would mark the end of the ratehike cycle, which the Bank of Korea began in August 2021.

There were more dissenters than expected and the governor39;s comments were dovish in general, said Ahn Jaekyun, fixedincome analyst at Shinhan Securities.

Bank of Korea Governor Rhee Changyong told a news conference that two of the six board members had voted to hold interest rates steady. Rhee does not vote when a majority is…