Seoul, Oct 11
South Korea's central bank on Friday cut its key benchmark interest rate, its first pivot in its years-long monetary tightening mode, as inflation continued to moderate and the property market showed signs of cooling.
As widely expected, the Bank of Korea slashed its key rate by 25 basis points to 3.25 per cent, the first reduction since August 2021, when Asia's fourth-largest economy began to emerge from the coronavirus pandemic-caused slump.
Many experts had noted that the central bank will not be able to delay a rate cut any longer, especially after inflation dropped to 1.6 percent in September, below its target rate of 2 percent, while concerns over domestic demand remain, reports news agency.
"While inflation is showing a clear trend of stabilisation, household debt growth has begun to slow with tightened macro-prudential policies by the government, and risks in the foreign exchange market have somewhat eased," the central bank said in a statement.
The BOK said exports have continued to increase while the recovery in domestic demand has been slow. "Uncertainties surrounding the growth outlook have heightened compared to August due to the delayed recovery in domestic demand," it said.
The central bank said it will thoroughly assess the trade-offs among policy variables, such as inflation, growth, and financial stability, and "carefully determine the pace of further cuts of the base rate."
The Federal Reserve also implemented a significant half percentage point rate cut last month, leaving leeway for the BOK to take its own step.