* President, central banker cautious on economy
* Yield curve steepens on receding chance of early rate rise
* Softer c.bank stance stirs debate on political pressure (Updates with lawmakers, analysts)
By Yoo Choonsik
SEOUL, Oct 15 (Reuters) - South Korea's central bank chief struck a guarded note on the economy's outlook, falling into step with the government's cautious stance and further reducing market bets on a near-term interest rate rise.
President Lee Myung-bak on Thursday brushed off signs of improvement in the job market, underscoring yet again his government's view that the economy was still too fragile to withstand monetary tightening.
But testimony by the central bank's governor Lee Seong-tae to parliament, though similar to his remarks made last week, marked a departure from more hawkish comments made last month.
The 1- and 3-year interest rate swap spread widened by 3 basis points to 78 points, although yields rose across the board with rallying global stock markets taking the shine off fixed-income instruments.
The central bank has in the past months repeatedly expressed concern over climbing property prices and warned, most recently in September, that it might jack up rates to prevent a speculative bubble from developing.
But speaking in parliament, Governor Lee noted uncertainty over global and South Korea's growth prospects and said that the real estate market was one of many factors influencing the central bank's interest rate policy.
"Over the long term, I do have concerns because it is doubtful that the world economy and the domestic economy will grow actively," Governor Lee said during the Internet-broadcast session, which continued throughout the day.
"It is also premature to be optimistic about the U.S. financial situation," he added, although it was not clear if he was referring to the financial industry or financial markets.
POLITICAL PRESSURE?
His remarks, drew criticism from one opposition lawmaker who accused him of caving in to political pressure.
"You have changed your position at the October monetary policy committee meeting... Isn't that reflecting your becoming more sympathetic to the government's position?" Baek Jae-hyun from the main opposition Democratic Party said.
Lee did not respond and analysts were divided whether the softening of the central bank's stance was a result of political pressure. Some argued the won's gains against the dollar and government lending controls have allowed the central bank to hold off with any tightening for longer than earlier thought.
The central bank kept its benchmark rate at a record-low 2.0 percent on Friday and noted that government efforts to cool the booming property market were bringing some results.
But others said that did not wash with stern warnings the central bank was still issuing last month.
"The governor tries to explain why his position has changed, but the explanation doesn't make much sense to me," said an economist at a domestic brokerage, who declined to be named. The central bank cut the 7-day repurchase agreement rate by a total of 3.25 percentage points between October last year and February.
Since the cuts were so aggressive, Governor Lee said any future rate rises would probably be in bigger steps that the "usual baby-step increases."
In contrast with the central bank chief, President Lee maintained his message that a lasting economic recovery was still not guaranteed.
"The economy is improving but the job situation is still a serious problem," a statement from the presidential Blue House quoted him as saying at a meeting with top economic officials.
The central bank said in a prepared report to the parliament it would make sure that its expansionary policy would not undermine economic and financial stability and that it would continue to watch asset prices and fund flows.
Even as bets on a November rate rise look largely off, money market rates continue to price in at least a 25 basis-point rise in the policy rate over the next three months.
The central bank next reviews its policy on Nov. 12. (Additional reporting by Jack Kim; Editing by Tomasz Janowski)