South Korea slashes interest rates by 25 basis points

By Tuba Ongun

ANKARA (AA) – The South Korean central bank on Thursday lowered its base interest rate by 25 basis points to 3%, marking the second consecutive monthly cut and the lowest rate since October 2022.

The Bank of Korea cited intensifying downward pressure on economic growth, stabilized inflation, and a slowdown in household debt as key reasons for the decision.

Despite increased exchange rate volatility, it is appropriate to further cut the base rate to mitigate downside risks to the economy, the bank stated.

The bank expects inflation to remain stable despite upward pressure from a rising exchange rate, thanks to declining global oil prices and subdued demand.

Inflation is projected to come in at 2.3% this year and 1.9% next year, revised down from the previous forecast of 2.5% and 2.1%.

It noted that inflation trends will depend on exchange rates, global oil prices, economic growth, and potential changes in public utility fees.

The Bank of Korea has also lowered its growth projections, reflecting a sluggish export sector and slowing employment gains.

The central bank now forecasts economic growth of 2.2% this year and 1.9% in 2025, down from its earlier estimates of 2.4% and 2.1%.