South Korea's central bank on Thursday revised up its growth outlook for Asia's fourth-largest economy this year to 3 percent as it held its key rate steady for October.

In a widely expected move, the monetary policy board of the Bank of Korea voted to keep the key rate at 1.25 percent, extending its wait-and-see approach for the 16th consecutive month.

In June last year, South Korea's central bank made a surprise rate cut, citing the need to stimulate the lackluster economy amid a prolonged economic slowdown.

The BOK raised its growth outlook for the country's gross domestic product to 3 percent for 2017, up 0.2 percentage point from the central bank's estimate released in July.

"Exports seem likely to sustain their buoyancy, thanks largely to the global economic recovery, and domestic demand activities will also recover moderately due to the expansion in fiscal spending," the BOK Monetary Policy Board said in an English-language statement.

The BOK also said facility investment could increase modestly and technical firms are expected to invest steadily due to buoyant conditions in the global technology industry.

The upward revision is in line with growth outlook by the South Korean government and the International Monetary Fund.

Earlier this month, the International Monetary Fund adjusted South Korea's gross domestic product growth to 3 percent, up 0.3 percentage point from its previous estimate in April, citing the recovery in global trade and China's import demand.

In July, the South Korean government raised its target growth to 3 percent from 2.6 percent, citing export-led growth.

The BOK said it expects South Korea's diplomatic row with China to drag down the country's growth by 0.4 percentage point this year.

China has carried out economic retaliation against South Korea, including a ban on group tours to South Korea, in protest of the deployment of an advanced U.S. anti-missile system in South Korea.

The BOK said it expects South Korea's economy to expand by 2.9 percent next year as the global economy continues to recover and private consumption may shows a higher rate of growth than this year.

The monetary policy board said it "will maintain its accommodative policy stance," as the inflationary pressures on the demand side are forecast to not be high for the time being, while the domestic economy is expected to continue its solid growth.

Still, BOK Gov. Lee Ju-yeol said the market conditions are "somewhat ripe" for the central bank to gradually tighten its monetary easing stance, hinting at a possible rate hike in the near future.

In June, Lee said the central bank may take a monetary tightening approach if the economy shows signs of robust recovery.

The latest freeze came amid lingering concerns about rising household debt.

South Korea's overall household debt came to 1,388.3 trillion won ($1.22 trillion) as of end-June, up 10.4 percent from a year earlier, according to data compiled by the BOK.

The monetary policy board vowed to monitor any changes in the monetary policies of major countries, conditions related to trade with major countries, the trend of increase in household debt, and geopolitical risks. (Yonhap)