BOK cuts interest rate to 3% in surprise move

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BOK cuts interest rate to 3% in surprise move

Published: 28 Nov. 2024, 10:15

SHIN HA-NEE
[email protected]

Bank of Korea Gov. Rhee Chang-yong bangs the gavel at the central bank in central Seoul on Thursday. [JOINT PRESS CORPS]

The Bank of Korea (BOK) slashed its key interest rate by 25 basis points to 3 percent on Thursday during its final rate-setting meeting of the year. The widely unexpected move marks a second consecutive month of a 0.25 percentage point reduction.

The surprise rate cut occurred despite the weak local currency against the dollar and signals from the U.S. Federal Reserve suggesting a slowdown in its rate reductions. The decision reflects a sluggish recovery in domestic demand and heightened uncertainties stemming from potential policy changes under the incoming Donald Trump administration, which cloud Korea’s economic outlook.

According to the Korea Financial Investment Association, 83 percent of bond experts, including analysts, had expected the BOK’s Monetary Policy Board to maintain the rate, while 17 percent predicted a 25 basis point cut.

A total of 100 respondents from 58 institutions participated in the survey conducted over six days through Nov. 20.

This latest decision by the Monetary Policy Board follows a 25 basis point reduction in October, which was the first cut since May 2020.

The BOK also lowered its growth forecast for the Korean economy from the previous 2.4 percent to 2.2 percent for 2024, and from 2.1 percent to 1.9 percent for 2025.

BY SHIN HA-NEE [[email protected]]