Bank of Korea Cuts Rate to 3% in Growth-Focused Policy Shift

Seoul, South Korea—The Bank of Korea lowered its benchmark interest rate by 25 basis points to 3.00% on Thursday, aiming to support economic growth amid weakening exports and subdued inflation.

The Bank of Korea (BOK) also immediately reduced its policy loan interest rate to 1.50% from 1.75%.

The central bank downgraded its growth forecasts, now projecting the economy to expand 2.2% in 2024 and 1.9% in 2025, down from its previous August forecasts of 2.4% and 2.1%, respectively.

Consumer price inflation has shown a stabilizing trend, with October recording a 1.3% increase, while core inflation, excluding food and energy, slowed to 1.8%. The BOK revised its inflation outlook lower to 2.3% for 2024 and 1.9% for 2025, compared to previous projections of 2.5% and 2.1%.

"While exchange rate volatility has increased, inflation has stabilized and household debt growth has moderated, while downward pressure on growth has intensified," the BOK said in its monetary policy statement.

The decision comes when the domestic economy faces the headwinds of slowing export growth due to intensifying competition in key industries and increasing protectionism. 

Employment growth is also showing signs of weakening despite low unemployment rates.

The central bank pointed out that future monetary policy decisions should carefully consider the impact of interest rate cuts on inflation, growth, household debt, and exchange rate stability.