Bank of Korea Cuts Interest Rate Again After Three Months…Growth Forecast Lowered to 0.8% This Year

Base rate cut by 0.25%p to 2.50%

The Bank of Korea's Monetary Policy Committee lowered the base interest rate from the current 2.75% to 2.5% by 0.25 percentage points on the 29th. The growth forecast for this year was lowered to 0.8%, which is half of the February forecast (1.5%).

The Bank of Korea announced that it made this decision at a monetary policy direction meeting held at its headquarters on the same day. This is the second rate cut this year following February.

The rate cut is analyzed to have been made as domestic economic sluggishness deepens and exports are expected to be adversely affected by the U.S. government's tariff policy.

The Bank of Korea revised its existing economic outlook on this day, lowering this year's economic growth forecast by 0.7 percentage points from 1.5% to 0.8%. Next year's growth rate was also lowered by 0.2 percentage points to 1.6% compared to the February forecast. The inflation rate forecast for this year remains at the existing forecast (1.9%), but next year's inflation rate is presented at 1.8%, 0.1 percentage points lower than the previous forecast.

The Monetary Policy Committee has embarked on rate cuts since October last year, lowering rates by a total of 1 percentage point over four occasions by 0.25 percentage points each. Bank of Korea Governor Chang-Yong Lee (pictured) hinted at this rate cut during a press conference after the rate freeze decision in April, saying, "All six members of the Monetary Policy Committee (excluding the governor) should keep the possibility of lowering the base rate within three months open."

Reporter Left-Dongwook leftking@hankyung.com