Financial institution of Korea unexpectedly cuts rates of interest by 25 bps

Investing.com– South Korea’s central financial institution lowered its rates of interest by one other 25 foundation factors in a shock transfer on Thursday, because the financial institution warned that financial progress was prone to sluggish additional within the coming 12 months.

The Financial institution of Korea lowered its benchmark rate of interest by 1 / 4 share level to three.00% at its financial coverage overview, the place it was extensively anticipated to leaves the speed unchanged to assist the Korean gained in opposition to a robust U.S. greenback.

The speed lower comes as policymakers intention to bolster a sluggish financial system that narrowly averted a technical recession earlier this 12 months. South Korea’s third-quarter gross home product expanded by solely 0.1% quarter-on-quarter, weighed down by declining exports and tepid shopper spending. 

The central financial institution expects slower GDP progress in 2025 of 1.9%, in comparison with its August forecast of two.1%. It additionally sees shopper worth index inflation at 1.9% in 2025, down from its 2.1% prior estimate.

The South Korean gained weakened sharply on Thursday, with the USD/KRW pair up 0.5% after the BoK’s resolution.

The central financial institution had lower rates of interest for the primary time since mid-2020 in October, and stated that there was room for additional easing. Decrease rates of interest supply some reduction to households which have confronted the best borrowing prices in 16 years.