Bank of Korea Gov. Rhee Chang-yong speaks during a press conference at the central bank in Seoul, South Korea, Thursday, Nov. 28, 2024. (AP Photo/Ahn Young-joon)
South Korea’s central bank cut interest rates Thursday for the second time in a row in a surprise move, citing stabilising inflation and the need to mitigate growing economic risks.
The Bank of Korea’s 0.25 percentage point reduction, which followed a similar move in October, lowers the benchmark rate to 3.0 percent and comes as authorities around the world ease monetary policies after years of hikes aimed at tackling soaring prices.
It also cut its growth outlook for Asia’s fourth largest economy.
READ: South Korea surprises with second successive rate cut
The BOK said in a news release that it made the decision because “inflation stabilization has continued along with an ongoing slowdown in household debt, and downward pressure on economic growth has intensified”.
The monetary policy board called the cut “appropriate… to mitigate downside risks to the economy”.
“The currently available information suggests that the global economy has been facing heightened uncertainties surrounding growth and inflation, driven by the new US administration’s policies,” it added, referring to the re-election of Donald Trump, who has pledged to renew his hardball approach to trade.
The pace of further rate cuts will be “determined by how the current rate cuts affect inflation, growth, household debt, and the currency rate down the road”, BOK chief Rhee Chang-yong said at a news briefing.
The consecutive rate cuts follow a sharp fall in consumer inflation to 1.3 percent in October, largely driven by declining energy prices.
The bank also lowered its economic expansion forecast for this year to 2.2 percent, from an earlier projection of 2.4 percent, citing a slowdown in export growth.
It warned that there were still uncertainties for the economy, including “changes in the trade environment, trends in IT exports, and the pace of recovery in domestic demand”.