0.25% Cut in Call Rate Expected

The Bank of Korea will announce a new call rate, the one at which financial institutions lend to each other and a basis for short-term interest rates, on Thursday. The national bank is expected to lower the rate by 0.25 percent to 5 percent, said a bank official.

Comparing indexes for productivity and consumer prices, the fear of recession outweighs inflationary pressures, the official continued, noting that the economy is cooling faster than was expected.

The market is reflecting expectations that the bank will lower the rate, but the reduction will not surpass 0.25 percent, he said.

Financial institutions are taking the cut for granted and expecting another cut this year. A Hana Bank official and one from Citibank agreed that if a 0.25 percent cut cannot turn the economy around, the national bank will cut once more in the first half.

by Cheong Chul-gun