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CORRECTED - CORRECTED-S.Korea c.bank not tightening policy -official

Reuters - Thursday, June 25

(Corrects 5th paragraph to show that short-dated bond yields rose in June not July)

SEOUL, June 24 - The South Korean central bank has not shifted its monetary policy stance towards tightening yet as the economy still faces uncertainty, a central bank official said on Wednesday.

"The latest market operations taken to control the level of liquidity do not mean we're gearing up for a tightening stance. Rate hikes, if needed, will come over time and gradually," said Min Seong-kee, head of the financial markets division at the Bank of Korea.

The central bank recently increased its issuance of monetary stabilisation bonds and drained more cash from the system.

"I don't believe yields will continue to rise sharply, but will stabilise at a level higher , as the economic outlook is not as rosy as many market players believe," he said at a seminar with analysts and dealers.

Short-dated bond yields soared after the central bank governor confirmed that the economic crisis had reached a bottom and warned against rising oil prices on June 12, with many market players increasingly betting on an earlier-than-expected rate increase.

The yield on one-year treasury bonds <KR1YT=KSDA> jumped nearly 60 basis points over three sessions to hit a five-month high on June 15.

Nomura International economist Kwong Young-sun said the Bank of Korea would have to raise the base rate <KROCRT=ECI> as early as the fourth quarter, as the record-low 2 percent interest rate was well below inflation.

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