Bank Of Korea Cuts Policy Rate By 25 Bps

(RTTNews) - The Bank of Korea reduced its benchmark rate by a quarter-point on Tuesday as domestic political unrest and trade policies of the US government weighed on domestic demand and economic growth.

The monetary policy board, governed by Rhee Chang Yong, decided to lower the Base Rate by 25 basis points to 2.75 percent.

The decision matched expectations. This was the third reduction in the last four meetings.

The board judged that it is appropriate to further cut the interest rate to mitigate downward pressure on the economy.

The bank downgraded its growth outlook for this year to 1.5 percent from 1.9 percent as deteriorating economic sentiment and US tariff policies dampen the domestic demand recovery and export growth.

Despite upward pressure from the exchange rate, inflation is forecast to remain stable at around 2 percent, affected by subdued demand pressure. As a result, the bank maintained its inflation outlook at 1.9 percent for this year. Core inflation forecast was trimmed to 1.8 percent from 1.9 percent.

Further, the bank observed that housing prices declined in most regions excluding Seoul and household loans sustained its slowing trend.

The central bank said the domestic political situation, effects of the past rate cuts on inflation, economic growth and financial stability will determine the timing and pace of any further rate cuts.

Capital Economics economist Gareth Leather said there are good reasons to expect the central bank to cut rates again over the coming months to support the struggling economy.

ING economist Min Joo Kang said the BoK is likely to ease three more times in 2025, once per quarter, as a lower-than-neutral rate is needed to support growth.