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BOK cuts interest rate to 2.75%, warns of slower growth at 1.5%

Published: 25 Feb. 2025, 09:52 Updated: 25 Feb. 2025, 19:57

SHIN HA-NEE
[email protected]

Bank of Korea Gov. Rhee Chang-yong at the Monetary Policy Board meeting on Feb. 25 at the central bank in Jung District, central Seoul. [JOINT PRESS CORPS]

The Bank of Korea (BOK) lowered its key interest rate by 25 basis points to 2.75 percent on Tuesday, amid persistently weak domestic demand and growing concerns over slowing economic growth due to the country’s declining export momentum.

The decision followed the central bank’s decision to keep the rate unchanged in January due to the won’s depreciation against the dollar.

The BOK had previously implemented two consecutive 25-basis-point cuts in October and November.

Fifty-five percent of bond experts, including analysts, expected the BOK to lower the key rate in February, according to a survey released by the Korea Financial Investment Association on Feb. 21. This marked an increase from 40 percent in January’s survey. The remaining 45 percent predicted that the central bank would keep the rate steady due to market volatility.

The BOK also announced its adjusted growth projection for the Korean economy, lowering its forecast for this year to 1.5 percent from the previous 1.9 percent released in November last year.

The adjusted projection is even lower than the 1.6 to 1.7 percent range the central bank suggested in its January report.

While the BOK typically announces its growth projection four times a year — in February, May, August and November — the central bank issued a rare January forecast on Jan. 20 due to the worse-than-expected impact of the martial law declaration and subsequent political turmoil.

However, the inflation projection remained unchanged at 1.9 percent.

BY SHIN HA-NEE [[email protected]]