Bank of Korea to cut rate on May 29, more easing ahead
BENGALURU, May 27 (Reuters) - The Bank of Korea (BOK) will lower its key policy rate by 25 basis points on Thursday as economic activity contracted in the last quarter and benign inflation supports the case for easing, a Reuters poll of economists found.
BOK Governor Rhee Chang-yong signalled the possibility of a rate cut at the April meeting, days before official data showed South Korea's economy contracted 0.2% in the first quarter from the previous three months.
With inflation at 2.1% in April - close to the BOK's 2.0% target - and the Korean won rebounding around 9% from last month's low, the central bank has more space to resume its easing cycle.
All 36 economists polled between May 19-25 expected the BOK to cut its base rate (KROCRT=ECI), opens new tab by 25 basis points to 2.50% on May 29, a level last seen in August 2022.
"At the April meeting, policymakers strongly suggested that there would be a rate cut and the near-term growth forecasts could be revised downwards," said Suktae Oh, chief Korea economist at Societe Generale.
"Since then, we have not seen anything in the data that would be likely to deter them. Indeed, the Q1 GDP contraction, continued uncertainty on U.S. tariffs and the decline in the USD/KRW exchange rate further support monetary easing."
Among those who provided a longer-term outlook on rates, a strong majority of economists, 23 of 27, expected the key interest rate to fall by 50 basis points from current level to 2.25% by the end of next quarter, a view broadly unchanged from the previous poll.
However, a slight majority, 15 of 27, or around 56%, forecast an additional 25 basis point cut by the end of the fourth quarter, bringing the rate to 2.00%, a quarter percentage point lower than in the previous poll conducted in April.
Apart from monetary easing, economists in the poll also pointed to the likelihood of fiscal support following the presidential election in early June, on top of the 13.8 trillion won ($10.1 billion) supplementary government budget approved this month.
"After lowering the (interest rate) to 2.00%, we see the BOK prioritising financial stability while passing the baton for boosting growth to the government from next year," wrote Kathleen Oh, chief Korea economist at Morgan Stanley.
The South Korean economy was expected to grow 1.3% this year, a separate Reuters poll found, higher than the International Monetary Fund's forecast of 1.0% and the BOK's projection of 1.5%, which most economists said will be revised downward on Thursday.
(Other stories from the May Reuters global economic poll)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
32 minutes ago
- Reuters
Fed's Harker says rate cuts this year still possible, amid data quality worries
June 6 (Reuters) - As he heads toward retirement at month's end, Philadelphia Federal Reserve President Patrick Harker says interest rate cuts remain a possibility this year amid a very uncertain economic landscape, as he also flagged worries about the quality of economic data policymakers use to make their decisions. When it comes to easing monetary policy, 'it's possible, I would never take it off the table,' Harker said in an interview with Reuters on Thursday. 'If the signals are such that inflation doesn't look like it's moving rapidly north, but unemployment does then, yeah, I could definitely see making one or more cuts this year, but it's hard to say at this point.' Harker was interviewed in the final weeks of his tenure, as he's set to retire at the end of June after taking the reins of the Philadelphia Fed in 2015. The Fed next meets on June 17-18 when it is universally expected to hold its interest rate target steady at between 4.25% and 4.5%. What happens later in the year is up in the air, as the Trump administration's chaotic trade policy featuring ever-changing high import taxes will likely drive up inflation and lower employment. The question facing Fed officials is whether the inflation rise is a one-off or the makings of something more enduring. Those uncertainties have blunted officials' ability to provide guidance on the monetary policy outlook and have pushed them into signaling a wait-and-see attitude. Harker, an engineer by training who led the University of Delaware before coming to the Fed, said in the interview that he was increasingly worried about the quality of the data policymakers in general rely on. Data, including that produced by the government, is 'not good. It's not getting better,' Harker said. 'It's not just inflation data but a whole host of data, so we're increasingly flying blind, or at least half blind.' Harker's worries about the state of data come in the wake of reports the government was cutting back on resources devoted to compiling the closely watched consumer price index, which provides a critical reading that informs things like the wage changes in union contracts and the setting of social security benefits.
Coin Geek
34 minutes ago
- Coin Geek
Bitcoin mining trends in May 2025: Global surge amid innovation
Getting your Trinity Audio player ready... As of May 2025, Bitcoin mining is experiencing a transformative phase driven by technological advancements, regulatory shifts, and evolving economic dynamics. With BTC's price soaring past $110,000, the industry is witnessing a global 'digital gold rush' as nations and companies capitalize on the digital currency's bullish momentum. From Pakistan's bold energy allocation to cutting-edge hardware innovations and shifting profitability landscapes, recent news highlights a rapidly evolving sector navigating opportunities and headwinds. This article explores the key trends shaping Bitcoin mining in May 2025, reflecting a mix of strategic national policies, technological breakthroughs, and market challenges. One of the most significant developments is Pakistan's ambitious move to allocate 2,000 megawatts (MW) of surplus electricity to BTC mining and AI data centers, announced at the BTC Vegas 2025 conference. This initiative, led by the Pakistan Crypto Council and Finance Minister Muhammad Aurangzeb, aims to transform the country's underutilized energy capacity—particularly from coal-fired plants operating at 15% capacity—into a revenue-generating asset. Estimates suggest this could yield 17,000 BTC annually, worth approximately $1.8 billion at current prices. Pakistan's strategy includes creating a national BTC reserve and establishing the Pakistan Digital Assets Authority to regulate the sector, positioning the country as a potential hub for digital currency and high-tech industries. However, the International Monetary Fund (IMF) has raised concerns about this allocation amid Pakistan's energy shortages, highlighting the tension between economic innovation and domestic needs. Technological advancements are also reshaping the mining landscape. Bitmain unveiled the Antminer S23 Hydro at the World Digital Mining Summit, boasting an energy efficiency of 9.7 joules per terahash (J/TH), a significant leap from the 1,200 J/TH of 2013 models. Set for release in Q1 2026, this rig reflects a broader trend toward energy-efficient hardware as miners face tighter margins post the 2024 Bitcoin halving, which slashed block rewards. The focus on efficiency is critical, as rising network hash rates—up 6.7% in April 2025—have driven a 6.6% drop in mining profitability. Miners are increasingly replacing older rigs rather than expanding fleets, aiming to survive squeezed margins in a competitive market where hashprice remains below pre-halving levels of $100/PH/s. Regulatory tailwinds fuel optimism, particularly in the United States, which dominates global BTC mining with over 36% of the hash rate. Pro-crypto policies, including Texas's push for a state-run Bitcoin reserve, create a favorable environment. The U.S. has seen persistent demand for BTC through spot exchange-traded funds (ETFs), with $3.3 billion in net inflows in May alone. However, not all news is positive: BlackRock's spot Bitcoin ETF recorded its largest outflow day on May 30, with $430.8 million withdrawn, ending a 31-day inflow streak. This volatility underscores the market's sensitivity to macroeconomic factors, such as rising U.S. Treasury yields and trade tensions with China. Globally, other nations are joining the mining race. Ecuador hosted its first Bitcoin mining event in Guayaquil, signaling a growing interest in Latin America. Meanwhile, countries like Kazakhstan, Japan, Malaysia, and Bhutan continue to embrace legal mining to bolster their economies. The global hash rate is climbing, reflecting increased competition, but this also raises environmental concerns. A recent analysis suggests AI data centers could surpass Bitcoin mining in energy consumption by year-end, potentially consuming as much power as a country like the U.K. This has sparked debates about sustainability, with environmental advocates pushing for greener blockchain solutions. However, miners resist abandoning existing hardware investments. Home mining is also making a comeback, driven by falling energy prices in key U.S. states, cheaper ASICs, and regulatory clarity from frameworks like the EU's MiCA. Platforms like BCC Mining have launched mobile apps offering 'free cloud mining' for BTC, Litecoin, and Dogecoin, lowering barriers for retail miners. However, the profitability squeeze and high initial costs remain hurdles for small-scale operations. Market sentiment remains bullish, with analysts predicting BTC could reach $200,000 to $330,000 by year-end, driven by institutional adoption and post-halving scarcity. U.S. public companies now hold $349 billion in BTC, a 31% increase since January, while ETF inflows outpace mined coins (26,700 BTC bought vs. 7,200 mined in May). Yet, challenges persist: fraud attempts surged 200% in Q1 2025, and miners face delays and tighter margins. Smart miners are shifting to flexible, hosting-first strategies to adapt. As Bitcoin mining evolves, it balances innovation with economic and environmental challenges. Nations like Pakistan are betting on crypto to drive economic growth while technological advancements and regulatory shifts create new opportunities. However, rising hash rates, profitability pressures, and sustainability concerns highlight the need for strategic adaptation. The industry's trajectory in 2025 will depend on navigating these complexities while capitalizing on Bitcoin's unprecedented market momentum. Watch: Bitcoin mining in 2025: Is it still worth it? title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="">
Reuters
42 minutes ago
- Reuters
Exclusive: US suspends licenses to ship nuclear plant parts to China, sources say
June 6 (Reuters) - The U.S. in recent days suspended licenses for nuclear equipment suppliers to sell to China's power plants, according to four people familiar with the matter, as the two countries engage in a damaging trade war. The suspensions were issued by the U.S. Department of Commerce, the people said, and affect export licenses for parts and equipment used with nuclear power plants. Nuclear equipment suppliers are among a wide range of companies whose sales have been restricted over the past two weeks as the U.S.-China trade war shifted from negotiating tariffs to throttling each other's supply chains. It is unclear whether a Thursday call between U.S. President Donald Trump and Chinese President Xi Jinping would affect the suspensions. The U.S. and China agreed on May 12 to roll back triple digit, tit-for-tat tariffs for 90 days, but the truce between the two biggest economies quickly went south, with the U.S. claiming China reneged on terms related to rare earth elements, and China accusing the U.S. of "abusing export control measures" by warning that using Huawei Ascend AI chips anywhere in the world violated U.S. export controls. After Thursday's call, further talks on key issues were expected. The U.S. Department of Commerce did not respond to a request for comment on the nuclear equipment restrictions. On May 28, a spokesperson said the department was reviewing exports of strategic significance to China. "In some cases, Commerce has suspended existing export licenses or imposed additional license requirements while the review is pending," the spokesperson said in a statement. The Chinese Embassy in Washington did not immediately respond to a request for comment. U.S. nuclear equipment suppliers include Westinghouse and Emerson (EMR.N), opens new tab. Westinghouse, whose technology is used in over 400 nuclear reactors around the world, and Emerson, which provides measurement and other tools for the nuclear industry, did not respond to requests for comment. The suspensions affect business worth hundreds of millions of dollars, two of the sources said. They also coincide with Chinese restrictions on critical metals threatening supply chains for manufacturers worldwide, especially America's Big Three automakers. Reuters could not determine whether the new restrictions were tied to the trade war, or if and how quickly they might be reinstated. Department of Commerce export licenses typically run for four years and include authorized quantities and values. But many new restrictions on exports to China have been imposed in the last two weeks, according to sources, and include license requirements for a hydraulic fluids supplier for sales to China. Other license suspensions went to GE Aerospace for jet engines for China's COMAC aircraft, sources said. The U.S. also now requires licenses to ship ethane to China, as Reuters reported first last week. Houston-based Enterprise Product Partners (EPD.N), opens new tab said Wednesday that its emergency requests to complete three proposed cargoes of ethane to China, totaling some 2.2 million barrels, had not been granted. Enterprise said a May 23 requirement for a license to sell butane to China, in addition to the ethane, was subsequently withdrawn. Dallas-based Energy Transfer said it was notified on Tuesday about the new ethane licensing requirement, and planned to apply and file for an emergency authorization. Other sectors that have been hit with new restrictions include companies that sell electronic design automation software such as Cadence Design Systems (CDNS.O), opens new tab.
