Photo : YONHAP News
Anchor: The Bank of Korea(BOK) has lowered its key interest rate to three-point-25 percent, marking its first pivot from a yearslong monetary tightening mode. Our Bae Joo-yon has more.
Report: The central bank announced on Friday following a meeting of its Monetary Policy Board that it will lower its key lending rate by a quarter percentage point to three-point-25 percent.
This is the first time the BOK has departed from its monetary tightening policy in over three years, since it started raising rates in August 2021.
The cut comes amid a slow economic recovery and sluggish domestic demand, with the economy contracting zero-point-two percent on-quarter in the April-June period and domestic consumption decreasing zero-point-two percent in the same period.
BOK Governor Rhee Chang-yong said policymakers came to the decision to cut the rate as it became unnecessary to maintain an excessive level of austerity amid slowing inflation.
Speaking to reporters on Friday, Rhee hinted at the possibility of an additional rate cut, noting that the neutral interest rate limit is higher than the actual interest regardless of the measurement model.
The BOK chief said the pace of future cuts will depend on the stability of the nation’s financial markets, adding that the move could be regarded as a hawkish decline.
The BOK’s move comes after the U.S. Federal Reserve recently lowered its key interest rate for the first time in more than four years, cutting it by zero-point-five percentage point to the range of four-point-75 percent to five percent.
With the BOK’s rate cut, the gap between its rate and the Fed’s widened to one-point-75 percentage point.
Bae Joo-yon, KBS World Radio News.