The Bank of Korea's monetary policy committee kept its base rate unchanged at 3.25 percent.
Central bank Governor Kim Choong-soo told a news conference after the rate decision that downside risks to the global economy were on the rise and the local economy's momentum was "contracting", adding inflation would likely head downward although at a modest pace.
Analysts saw his remarks as admitting to the market's growing consensus that its tightening cycle has ended.
"Governor Kim made it very clear today that there will be no rate increase for a considerable period by saying economic growth is weak," said Yum Sang-hoon, fixed-income analyst at SK Securities.
ANALYSTS SEE RATE CUT IN H1
The bank hiked rates by a total of 125 basis points between July 2010 and June last year but has stood pat since. All 18 analysts surveyed by Reuters had forecast it would leave the rate unchanged on Friday.
In a statement issued after the decision, the central bank said it would "conduct monetary policy so as to stabilise consumer price inflation at the midpoint of the inflation target over a medium term horizon amid continuing sound growth of the economy."
That is a moderation of its December statement that it would "firmly anchor the basis for price stability amid continuing sound growth of the economy."
The decision came after central banks in the euro zone, UK and Indonesia left their interest rates at record-low levels this week to help their economies weather the cooling global economy and prolonged euro zone debt crisis.
As the slowing economy becomes a bigger risk than inflation around the world, a majority of analysts now expect the Bank of Korea to start cutting interest rates over the next few months, although a minority still see a hike later this year.
Bond futures prices rose as investors welcomed Kim's largely dovish remarks on inflation, but gains were limited as traders had already been seeing a growing case for lower rates.
South Korean households are among the most indebted in the world and rate hikes could apply a further brake on domestic economic expansion at a time when risks to exports are growing.
The central bank has so far stuck to its mantra of interest rate "normalisation" to fight inflation.
December year-on-year inflation was steady at 4.2 percent, remaining stubbornly above the 4 percent ceiling of the central bank's target range.