S Korea central bank cuts key interest rate anew; trims GDP forecasts

SINGAPORE (ICIS)–South Korea’s central bank on Thursday made a surprise cut to its key interest rate, following a similar move in the previous month, amid concerns over economic implications of the US’ impending tariffs on all foreign goods.

The Bank of Korea (BoK) reduced its benchmark interest rate by 25 basis points to 3.00% as the country grapples with global economic uncertainties and a strengthening of the US dollar, it said on Thursday.

“In the future, the global economy and international financial markets are expected to be affected by the new US administration’s economic policy implementation, changes in major countries’ monetary policies, and geopolitical risks,” the BoK said in a statement.

As of 02:30 GMT, the South Korean won (W) was trading at W1,394 against the US dollar.

South Korea is heavily reliant on trade, with China and the US as its biggest trade partners.

Korea’s domestic economy has also weakened amid slowing export growth, although demand is recovering gradually, it added.

The country’s Q3 GDP growth stood at 1.5%, continuing its deceleration from a 2.3% pace set in Q2.

Accordingly, the BoK has revised down its growth forecast for 2024 to 2.2% from 2.4%, and for 2025, to 1.9% from 2.1%.

The country’s inflation rate of 1.3% in October was well below the 2.0% target and is expected to remain stable amid a decline in international oil prices and low demand pressure, but a volatile exchange rate might push inflation up if the US dollar continues to strengthen.

A stronger US dollar also raises import costs, which would cause domestic prices to increase.

The BoK will conduct its next meeting on 16 January 2025.

($1 = W1,394)

Thumbnail image: South Korea’s capital city, logged a record November snowfall, with more than 16 cm of snow blanketing Seoul – 27 November 2024.(Xinhua/Shutterstock)