If it does make an emergency cut -- and some analysts say it could be by as much as 50 basis points -- it be only the second such move since it introduced its current rate-setting system in 1999.

The first time was a half percentage point shortly after the September 11, 2001 attacks on the United States.

The Bank of Korea joined a global rate cut earlier this month, reducing its main interest rate by 25 basis points to 5 percent and some analysts said Monday would see another cut.

Separately, the central bank announced that it would allow commercial banks to provide foreign currency loans to exporters to help them settle foreign currency options and also let lenders further extend maturities for foreign currency loans.

Monday's meeting follows last week's sharp falls in share prices and the won, both dragged down by fears that the global financial storm is weakening South Korea's economic growth, already at a four-year low.

Many analysts are also expecting the central bank to announce measures to buy bonds from local banks which have been struggling with a domestic liquidity squeeze brought on by the global financial downturn.

If it does, it will be the first such measure by the central bank.

On Sunday, President Lee Myung-bak presided over an emergency meeting of top economic officials.

His senior economic aide Bahk Byoung-won later told reporters that the government needed to take urgent action to prop up the economy, including stabilizing market interest rates and providing enough liquidity to prevent corporate bankruptcies.

He also said it was important to reduce the interest burden on smaller companies and households.

Bahk added that it was inevitable the government would have to adjust next year's budget to help revive the economy.

President Lee is scheduled to address parliament on the budget on Monday, as Asia's fourth largest economy buckles under the strain of the global financial turmoil.

Bahk said it would be difficult this time for the economy to recover from the downturn as fast as it did after the 1997/98 Asian financial crisis.

(Writing by Jonathan Thatcher; Editing by Keiron Henderson)