See More on Facebook

Economics

BOK slashes key rate to record-low 1.25%

The government hopes to stimulate a stagnating economy.


Written by

Updated: October 17, 2019

South Korea’s central bank on Wednesday cut the country’s key interest rate to 1.25 percent, reflecting the sluggish economic growth, low inflation and declining exports.

Its second rate cut in three months — to the lowest ever level — is in line with the global trend toward monetary easing.

“We have cut the base rate considering the lower-than-expected growth outlook and low inflation,” said Bank of Korea Gov. Lee Ju-yeol in a press conference.The BOK’s rate-setting Monetary Policy Board decided to lower the base rate by 25 basis points from 1.5 percent that it had set three months ago.

The move paralleled the US Fed Reserve’s decision last month to lower its key interest rate to the 1.75-2 percent range, down 25 basis points from the previous 2-2.25 percent range.

The BOK board cited contractions in trade, slow domestic growth, financial volatility, trade protectionism and geopolitical risks as the main reasons for its decision.

However, two of the seven board members voted for a rate freeze, Lee added.

The monetary easing move was largely anticipated in light of the recent economic performance.

In the board’s August meeting, two dovish members called for an additional rate cut, while others suggested a wait-and-see approach in light of the previous rate cut.

Asia’s fourth-largest economy saw its exports slip for the 10th consecutive month in September, dipping 11.7 percent on-year. It also logged negative growth in consumer prices for the first time ever, with an on-year decline of minus 0.4 percent in September.

The International Monetary Fund on Wednesday slashed its growth outlook for Korea’s economy this year to 2 percent, down 0.6 percentage point from its earlier forecast.

Frayed Seoul-Tokyo trade relations were also seen as a negative factor, though the BOK chief said the impact was not a major factor in the monetary policy decision.

“The consequences of Japan’s export curbs have so far been limited, falling short of affecting actual industrial production,” Lee said.

He also said Korea still had space in its policy operations despite the rate cut.

Market concerns persisted, however, as the pace of domestic economic growth is expected to to slow down throughout the rest of the year.

The BOK’s estimation for this year’s economic growth rate currently stands at 2.2 percent, having fallen steadily from the 2.6 percent forecast in the beginning of the year.

“(Even) the 2.2 percent growth this year will not be easy to achieve,” BOK Gov. Lee Ju-yeol admitted at a parliamentary audit session last week, hinting at a downward adjustment by the year-end.

“(The BOK) will maintain an easing stance in order to aid the recovery of economic growth.”

As for the low inflation trend, Lee has repeatedly cited a base effect created by the high prices of agricultural products last year, denying that the country is facing deflation.



Enjoyed this story? Share it.


The Korea Herald
About the Author: The Korea Herald is the nation’s largest English-language daily and the country’s sole member of the Asia News Network.

Eastern Briefings

All you need to know about Asia


Our Eastern Briefings Newsletter presents curated stories from 22 Asian newspapers from South, Southeast and Northeast Asia.

Sign up and stay updated with the latest news.



By providing us with your email address, you agree to our Privacy Policy and Terms of Service.

View Today's Newsletter Here

Economics

Local tourism hit hard by plunge in S. Korean visitors

South Korea and Japan are embroiled in a trade standoff which has extended to other realms of diplomacy. The decline in South Korean visitors to Japan continues unabated, spurred by the deterioration in bilateral relations. The number of South Koreans who visited in October fell 65 percent from a year earlier to a near-record low, and the number of foreign visitors to Japan overall also declined. This has dealt a significant blow to the aviation and tourism industries of both Japan and South Korea, and there are calls for Japan to increase the number of visitors from a wide range of regions to reduce its dependence on neighboring countries, which is greatly affected by political risks. Zero regular flights The international terminal at Oita Airport in Kunisaki, Oita Prefecture, was crowded with South Korean passengers until this summer. On Tuesday, however,


By The Japan News
November 22, 2019

Economics

Nepal’s luxury hotels are growing but the rooms are empty

There are 15 five-star hotels in the country, and a dozen more are being planned even as existing hotels continue to report a significant drop in profit. High-end hotels might be proliferating across the country but there aren’t enough guests to fill them up, according to the financial reports of Nepal’s three key five-star institutions. The first quarter financial reports from Taragaon Regency Hotels, Soaltee Hotel and Oriental Hotels, all of which are listed on the Nepal Stock Exchange, showed that profits have taken a nosedive after posting record profits last fiscal year. The first quarter of the fiscal year runs from mid-July to the end of September. The three hotel groups say that unhealthy competition, like price undercutting, a demand-and-supply gap, and a growing number of backpackers are behind the sharp fall in earnings. According to its report, Oriental Hotels, which operates Radi


By The Kathmandu Post
November 21, 2019

Economics

Trade disputes between Korea and Japan show no sign of abating

President Moon Jae-in blames Japan’s export controls for GSOMIA withdrawal. Escalating trade tension between South Korea and Japan shows no sign of abating as two rounds of bilateral talks to resolve disputes triggered by Japan’s export curbs could not reach common ground. On Tuesday, the two neighboring nations held the second round of talks at the World Trade Organization in Geneva after failing to reach a consensus at the first consultations on Oct. 11. “During two rounds of six-hour intensive consultations, the two nations became more aware of each other’s measures and positions in the process. But we don’t think the two sides have changed their positions,” Chung Hae-kwan, director general in charge of legal affairs at the Trade Ministry, told reporters at a press briefing in Geneva following a meeting with his Japanese counterparts on Tuesday. “We pointed out that Japan’s exp


By The Korea Herald
November 21, 2019

Economics

N. Korea says it sent ultimatum to S. Korea over Mount Kumgang project

Mount Kumgang is a joint economic venture. North Korea sent an ultimatum to South Korea earlier this week that it will unilaterally remove the South-built facilities from its Mount Kumgang resort unless Seoul tears them down on its own, Pyongyang’s official news agency reported Friday. The North’s tough stance suggests little room for inter-Korean negotiations that South Korea has sought in an effort to keep the long-suspended tour project that was considered one of the most tangible symbols of inter-Korean reconciliation and cooperation. North Korean leader Kim Jong-un (Yonhap) “We sent an ultimatum on Nov. 11 that i


By The Korea Herald
November 15, 2019

Economics

China, India doing ‘absolutely nothing’ to clean up

Garbage they drop in sea floats into Los Angeles: Donald Trump. US President Donald Trump at the Economic Club of New York on Tuesday, has said countries like China, India and Russia are doing “absolutely nothing” to clean up their smokestacks and industrial plants and the garbage that they drop in sea floats into Los Angeles. Trump also claimed that he considers himself to be, “in many ways, an environmentalist, believe it or not”. US president said that climate change is a “very complex issue.” “So…I’m very much into climate. But I want the cleanest air on the planet and I want to have – I have to have clean air – water,” Mr Trump said in remarks at the Economic Club of New York. Trump while addressing the audience said that the US withdrew from the “one-sided, horrible, horrible, economically unfair, ”close your businesses down within three


By The Statesman
November 14, 2019

Economics

Continued chaos on Hong Kong roads due to strikes

All schools shut on Thursday to protect students. Hong Kong on Wednesday (Nov 13) faced a third straight day of traffic chaos as protesters continued their strike,  obstructing roads and fighting pitched battles with police across the city as schools cancelled classes. The Education Bureau announced that all schools including kindergarten, primary and secondary as well as special schools will suspend lessons on Thursday (Nov 14) out of safety concerns. The Hong Kong Association of the Heads of Secondary Schools has asked the Education Bureau to suspend school on Friday as well. “In some schools situated under the impact of confrontational events, teachers and students had their lessons amidst the tear gas,


By The Straits Times
November 14, 2019