Unexpected Interest Rate Decision: South Korea's Central Bank Surprises with Rate Cut

  • Forecasts for economic growth and inflation have been revised downwards.
  • The Bank of Korea unexpectedly lowers the key interest rate by 0.25 percentage points.

Eulerpool News·

South Korea's central bank made a remarkable decision in its latest meeting by cutting the key interest rate for the second consecutive time. With a surprising reduction of 0.25 percentage points, the Bank of Korea (BOK) signals decisive action to revive the stalled economy and counteract declining inflation. This development was not anticipated by most experts, as only four out of 38 economists surveyed by Reuters had expected such a rate cut. This is the first such move since early 2009 that adjusts expectations for economic growth and inflation downward. The BOK lowered its growth forecast for the economy to 2.2% for the coming year and to 1.9% for 2024, each representing a slight reduction from previous estimates. The inflation forecast was also downgraded for the current year to 2.3%, compared to the earlier 2.5%. This decision led to the sensitive three-year government bond futures rising by 0.23 points to 106.64, while the won lost value. The bank had already signaled a neutral to moderate stance in its monetary policy in October when it lowered interest rates for the first time in over four years. BOK Governor Rhee Chang-yong will provide further insights into the reasons for the decision at a press conference, which will be broadcast live on YouTube.
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