South Korea's central bank has announced a second consecutive cut to its key policy rate in response to a slowing economy. The Bank of Korea reduced its benchmark interest rate by a quarter percentage point to 3% following a meeting of monetary policymakers. This decision comes as the bank revised its economic growth forecast downward, from 2.4% to 2.2% for 2024 and from 2.1% to 1.9% for 2025.
This latest rate cut marks the second time in as many months that the bank has taken steps to lower borrowing costs and increase the money supply. Despite concerns about high inflation and rising household debt levels, the bank is aiming to stimulate economic growth in the face of a challenging economic environment.
The Bank of Korea's previous rate cut in October, the first since May 2020 during the COVID-19 pandemic, was part of its efforts to support the economy. The bank cited uncertainties in global economic trends and inflation as key factors influencing its decision, noting potential impacts from the policies of the new U.S. government and ongoing geopolitical conflicts.
The bank highlighted that South Korea's trade-dependent economy is experiencing challenges, including weak domestic consumption, slowing exports, and declining employment. It anticipates a modest recovery in domestic consumption but expects export growth to be hampered by increased competition and protectionist trade policies in key industries.
Looking ahead, the Bank of Korea emphasized the need for continued monitoring of economic developments and policy adjustments to support sustainable growth. The bank's actions reflect a proactive approach to addressing economic challenges and fostering stability in the face of evolving global conditions.
