This move, aimed at countering slowing exports and uncertainties arising from the new Trump administration, underscores the central bank's commitment to reviving economic momentum.
In a surprising decision, the BOK's monetary policy committee reduced the key rate by 25 basis points to 3 percent. This marked the first back-to-back rate reduction since the 2008 global financial crisis and the first since May 2020.
While many analysts had anticipated a rate hold due to the weakening Korean won and concerns over high household debt, the BOK prioritized economic growth.
BOK Governor Rhee Chang-yong explained that four out of six board members supported the rate cut, recognizing the significant impact of the U.S. elections and the slowdown in exports. The BOK's statement highlighted the intensified downward pressure on economic growth and the need to stimulate the sagging economy, even in the face of foreign exchange market volatility.
The central bank lowered its economic growth outlook for 2025 to 1.9 percent and for 2024 to 2.2 percent, reflecting concerns over global economic uncertainties and the potential impact of U.S. policies.
The rate cut is expected to provide a modest boost to economic growth, but Governor Rhee acknowledged the possibility of further adjustments to the growth outlook.
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