South Korea central bank cuts interest rates amid growing pressure from Trump's tariff war
Rhee Chang-yong (Photo credit: AP)
South Korea's central bank lowered interest rates on Thursday to support its export-driven economy amid growing pressure from US President Donald Trump's tariff war. The bank also sharply cut its annual growth forecast, citing rising global uncertainties.
The Bank of Korea decreased its key interest rate "from the current 2.75 per cent to 2.5 percent" and revised its economic growth forecast to 0.8 percent for the year, down from its February projection of 1.5 percent.
The fourth-largest Asian economy showed lower-than-anticipated growth in the first quarter as the nation, known for its exports and semiconductor industry, struggled with domestic political instability and increased trade conflicts.
The interest rate reduction, previously indicated in April by bank governor Rhee Chang-yong, brings lending rates to their lowest point since October 2022.
"All six members of the Monetary Policy Board, excluding the governor, expressed the view that the door should be left open to a possible rate cut within the next three months," Rhee stated last month.
"Given what we've seen so far from the Trump administration's tariff policy, including reciprocal tariffs, China-specific tariffs, itemised duties, and a baseline 10 percent rate, the growth outlook scenario released in February now appears overly optimistic," he added.
The nation's export-oriented economy has suffered significantly from Trump's 25 percent tariffs on automobiles implemented in early April.
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