Home > Business > Economy

BOK to further cut benchmark rate to mitigate growing downside risks

Published: 25 Dec. 2024, 13:32

SHIN HA-NEE
[email protected]

Bank of Korea Gov. Rhee Chang-yong speaks during a press conference following a monetary policy board meeting held on July 11 at the central bank in Jung District, central Seoul. [JOINT PRESS CORPS]

The Bank of Korea (BOK) will cut its benchmark policy rate further next year to mitigate growing downside risks including harsher a trade environment and domestic political uncertainties, the central bank said Wednesday.

In its monetary policy report for 2025, the BOK said it will make additional rate reductions to maintain the moderating pace of growth in inflation, as well as to mitigate downside risks for the economy.

"The BOK will take increased political uncertainties, tougher competition [with global rivals] in [the country's] major industries and expected changes in the global trading markets into account when making rate decisions," the BOK said in the report.

The central bank will strengthen its early warning function to avoid any volatility in the financial markets amid uncertainties involving geopolitical risks and the economic policies of the new Donald Trump administration, it said.

The bank also vowed to implement market stabilization measures at the right time if needed.

The BOK unexpectedly slashed its policy rate for the second time in a row to help prop up the economy in November.

The bank cut its key rate by 25 basis points to 3 percent, marking the first back-to-back rate reduction since February 2009, when the country was reeling from the aftermath of the global financial crisis the previous year.

In October, it cut the rate by 25 basis points to 3.25 percent, the first pivot in more than three years.

The central bank signaled additional rate cuts in November, with three out of six monetary board members expressing a preference for holding the key rate steady at 3 percent for the next three months, while the remaining three advocated for keeping open the possibility of further cuts in the regular prognosticating forecast. A persistently high won-dollar exchange rate, however, remains a significant challenge, as it may further stimulate inflation.

BY SHIN HA-NEE, YONHAP [[email protected]]