Korea Business News Agency - NSP NEWS AGENCY.

(Seoul=NSP NEWS) = Five days before the early presidential election, the Bank of Korea’s Monetary Policy Committee(MPC) cut the base rate by 0.25%p. This is interpreted as an intention to boost domestic demand and diversify investment. In addition, the Bank of Korea significantly lowered its growth rate forecast for Korea from 1.5% to 0.8%.

On the 29th, the Monetary Policy Committee lowered the base rate from 2.75% to 2.5%. It has been lowered four times in seven months since October of last year. The Bank of Korea said, “Although there is still concern about the increase in household loans and the increase in volatility in the foreign exchange market, we judged it appropriate to further lower the base rate to ease downward pressure on the economy as the growth rate is expected to decrease significantly amid continued price stability.”

The Bank of Korea revised this year’s growth rate down significantly from the 1.5% forecast in February to 0.8%. The Bank of Korea explained, “Domestic demand will gradually ease its sluggishness going forward, but the pace is expected to be slow, and exports are expected to slow down further due to the impact of U.S. tariffs.”

This is the first time in five years that the BOK has revised its growth forecast by more than 0.7 percentage points since August 2020, when it lowered it by 1.1 percentage points during the COVID-19 pandemic. The growth rate forecast of 0.8% is the same level as the average forecast of eight major overseas investment banks(IBs) as of the end of last month and the forecast released by the Korea Development Institute(KDI) on the 14th.

The Bank of Korea also revised down its growth rate forecast for next year from 1.8% to 1.6%.

Meanwhile, with this interest rate cut, the interest rate gap between Korea and the United States has widened again to 2 percentage points.

By Soon-ki Lee(s8789@nspna.com) and Soo-in Kang(sink606@nspna.com)

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