South Korea’s central bank cuts a key rate to nurse a slower economy

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This article was published 27/11/2024 (375 days ago), so information in it may no longer be current.

SEOUL, South Korea (AP) — South Korea’s central bank on Thursday lowered its key policy rate for the second straight month and said the country’s economy will grow at a slower pace than it initially anticipated.

Following a meeting of its monetary policymakers, the Bank of Korea cut its benchmark interest rate by a quarter percentage point to 3%. The bank lowered its outlook for the country’s economic growth from 2.4% to 2.2% for 2024 and from 2.1% to 1.9% for 2025.

It was the second straight month that the bank took steps to lower borrowing costs and expand money supply, despite the lingering effects of high inflation and alarming levels of household debt, as concerns grow about a faltering economy.

The bank had also slashed its policy rate by a quarter percentage point to 3.25% in October, which presented its first rate cut since May 2020, when the economy was grappling with the COVID-19 pandemic.

The bank said the country’s trade-dependent economy is facing growing uncertainties in global economic trends and inflation, which it said could be impacted by the policies of the new U.S. government led by Donald Trump and ongoing geopolitical conflicts.

Since winning reelection, Trump has vowed to slap huge new tariffs on foreign products entering the United States, including those from Mexico, Canada and China, which he insists will create more domestic jobs and shrink the federal deficit.

The Bank of Korea said South Korea’s economy has been losing its growth momentum amid weak domestic consumption, slowing exports and decreasing employment.

“Going forward, domestic consumption will see a mild recovery, but the recovery in exports is likely to be weaker than initially anticipated due to intensifying competition and strengthening of protectionist trade policies in key industries,” the bank said in a statement.