In decisive efforts to boost the economy, South Korea has lowered its key rate to 3%, marking the second consecutive cut due to slowing export growth and overall economic uncertainty.
Rate Cut and Its Implications
The Bank of Korea has lowered the benchmark interest rate by 25 basis points, highlighting its commitment to revitalizing the economy. Despite analysts' expectations to maintain rates due to the Korean won's depreciation and growing household debt, the central bank chose economic recovery over exchange rate stability.
Inflation Slows, Forecasts Adjusted
October saw a consumer price increase of just 1.3%, the lowest in 45 months. The Bank of Korea also revised its 2024 inflation forecast down to 2.3%. The growth forecast for 2025 has been downgraded to 1.9%.
Economic Outlook
Exports, the economic driver, have sharply slowed. In October, exports rose by 4.6% year-on-year to $57.5 billion. Analysts warn of further deceleration due to potential US protectionism policies.
By cutting the key rate and adjusting forecasts, South Korea aims to sustain economic growth amidst slowing exports and shifting global economic conditions.
