Latest news with #BankOfKorea
CTV News
2 days ago
- Business
- CTV News
South Korea's central bank cuts borrowing costs to nurse the sluggish economy
People wearing face masks walk by the headquarters of the Bank of Korea in Seoul, South Korea, Thursday, May 28, 2020. (AP Photo/Ahn Young-joon) SEOUL, South Korea — South Korea's central bank cut its key interest rate and sharply lowered its growth outlook for the country's economy in 2025, as it moved Thursday to counter U.S. President Donald Trump's tariff hikes and weak domestic demand worsened by recent political turmoil. Following a monetary policy meeting, the Bank of Korea cut its benchmark interest rate by a quarter percentage point to 2.5 per cent. It was its fourth cut since October, when it began lowering borrowing costs for the first time in years to support a weakening economy. The bank slashed its 2025 growth outlook to 0.8 per cent, nearly halving its previous projection of 1.5 per cent announced in February. Share prices jumped, with the Kospi gaining 1.7 per cent. Although trade tensions have recently eased, the global economy is still expected to slow due to the lingering effects of increased tariffs. U.S.-China friction over trade and geopolitical uncertainties will continue to weigh on markets, the bank said in a statement. South Korea's domestic economic activity remained sluggish in April following a contraction in the first quarter driven by weak consumption and business investment, the bank said. It said job creation in manufacturing and other sectors was slow. Bank of Korea Governor Rhee Chang Yong said there could be additional rate cuts in coming months, citing the worsened outlook for the economy. But he also cautioned against lowering borrowing costs too quickly, given the country's high household debt and real estate prices. 'If rates are lowered too quickly, there's a high risk that liquidity will flow into asset prices like housing rather than boosting the real economy,' he said in a news conference. 'Any base rate adjustment must take into account its impact on the real estate prices and household debt in the Seoul region,' he said, referring to the country's capital area where house prices are highest. Since beginning his second term, Trump has vowed to slap huge new tariffs on foreign products entering the United States, including those from Mexico, Canada and China, which he insists will create more domestic jobs and shrink the federal deficit. In recent weeks, South Korea has sent trade officials to Washington to discuss the Trump administration's trade measures, including reciprocal tariffs and potential product-specific duties on semiconductors and cars, which are major exports for the country's trade-dependent economy. A decision by a U.S. federal court saying Trump lacks the legal authority to impose such tariffs could upset his plans, but the White House has appealed and it's unclear what will happen in the longer run. Experts say South Korea's leverage in trade talks and its ability to tackle domestic economic challenges have been undermined by political instability after former President Yoon Suk Yeol's ill-fated imposition of martial law in December. Yoon was formally ousted from office in April, setting the stage for a snap presidential election next week. Kim Tong-hyung, The Associated Press
Reuters
2 days ago
- Business
- Reuters
South Korea delivers dovish cut ahead of snap election
SEOUL, May 29 (Reuters) - South Korea's central bank cut interest rates for a fourth time in its current easing cycle on Thursday to support an economic recovery clouded by U.S. tariffs, just days ahead of a presidential election in Asia's fourth-largest economy. The Bank of Korea lowered its benchmark interest rate (KROCRT=ECI), opens new tab to 2.50%, as expected, and almost halved this year's economic outlook to 0.8% on Thursday. That suggests more scope for further easing just as presidential candidates from both major political parties promise bigger fiscal stimulus packages to counter a slowdown. "We of course have downside risks from (U.S.) tariff policy depending on how that goes, which raises the likelihood of further exports deterioration," Governor Rhee Chang-yong said in a news conference. While Rhee acknowledged the possibility that the trade outlook may improve, pointing to a U.S. court's decision to block Donald Trump's tariffs on Wednesday, the BOK remained primed for more support for the economy. Four of the BOK's seven board members said the door for further rate cuts should remain open for the next three months, Rhee said. The broadly dovish outlook pushed June futures on three-year treasury bonds higher. Having taken a relatively shorter period of time to rein in inflation, South Korea's monetary policy is set to be more accommodative by the end of this year than those of the U.S. or Australia and broadly on a par with Canada's and New Zealand's. Analysts see two more rate cuts by the end of this year to 2.00% in South Korea. As one of the world's most export-reliant economies, South Korea is heavily exposed to global trade and is likely to see more fallout from uncertainty caused by Trump's tariffs. Thursday's rate decision comes less than a week before South Korea votes for a new president, ending half a year of political limbo after ousted President Yoon Suk Yeol's failed martial law bid in December. Lower interest rates will be welcomed by the two main candidates, liberal frontrunner Lee Jae-myung and right-winger Kim Moon-soo. Both have pledged immediate spending to restore growth hurt by the enduring uncertainty caused by the Dec. 3 martial law decree. Data showing inflation close to the bank's 2% target and a weaker outlook for domestic activity have both supported arguments for further BOK easing. "It was indeed dovish as (Rhee) pointed to further cuts," said Kong Dong-rak, economist at Daishin Securities, who sees the policy rate reaching 2.25% by the end of this year. "But given that extra budgets are likely and the upside risks to growth, we can't be certain about going as low as 2.0%." South Korea's economy unexpectedly shrank in the first quarter as exports and consumption stalled amid fears over the impact of Washington's aggressive tariffs.
CNA
2 days ago
- Business
- CNA
South Korea delivers dovish cut ahead of snap election
SEOUL :South Korea's central bank cut interest rates for a fourth time in its current easing cycle on Thursday to support an economic recovery clouded by U.S. tariffs, just days ahead of a presidential election in Asia's fourth-largest economy. The Bank of Korea lowered its benchmark interest rate to 2.50 per cent, as expected, and almost halved this year's economic outlook to 0.8 per cent on Thursday. That suggests more scope for further easing just as presidential candidates from both major political parties promise bigger fiscal stimulus packages to counter a slowdown. "We of course have downside risks from (U.S.) tariff policy depending on how that goes, which raises the likelihood of further exports deterioration," Governor Rhee Chang-yong said in a news conference. While Rhee acknowledged the possibility that the trade outlook may improve, pointing to a U.S. court's decision to block Donald Trump's tariffs on Wednesday, the BOK remained primed for more support for the economy. Four of the BOK's seven board members said the door for further rate cuts should remain open for the next three months, Rhee said. The broadly dovish outlook pushed June futures on three-year treasury bonds higher. Having taken a relatively shorter period of time to rein in inflation, South Korea's monetary policy is set to be more accommodative by the end of this year than those of the U.S. or Australia and broadly on a par with Canada's and New Zealand's. Analysts see two more rate cuts by the end of this year to 2.00 per cent in South Korea. As one of the world's most export-reliant economies, South Korea is heavily exposed to global trade and is likely to see more fallout from uncertainty caused by Trump's tariffs. Thursday's rate decision comes less than a week before South Korea votes for a new president, ending half a year of political limbo after ousted President Yoon Suk Yeol's failed martial law bid in December. Lower interest rates will be welcomed by the two main candidates, liberal frontrunner Lee Jae-myung and right-winger Kim Moon-soo. Both have pledged immediate spending to restore growth hurt by the enduring uncertainty caused by the Dec. 3 martial law decree. Data showing inflation close to the bank's 2 per cent target and a weaker outlook for domestic activity have both supported arguments for further BOK easing. "It was indeed dovish as (Rhee) pointed to further cuts," said Kong Dong-rak, economist at Daishin Securities, who sees the policy rate reaching 2.25 per cent by the end of this year. "But given that extra budgets are likely and the upside risks to growth, we can't be certain about going as low as 2.0 per cent." South Korea's economy unexpectedly shrank in the first quarter as exports and consumption stalled amid fears over the impact of Washington's aggressive tariffs.
Washington Post
2 days ago
- Business
- Washington Post
South Korea's central bank cuts borrowing costs to nurse the sluggish economy
SEOUL, South Korea — South Korea's central bank cut its key interest rate and sharply lowered its growth outlook for the country's economy in 2025, as it moved Thursday to counter U.S. President Donald Trump's tariff hikes and weak domestic demand worsened by recent political turmoil. Following a monetary policy meeting, the Bank of Korea cut its benchmark interest rate by a quarter percentage point to 2.5%. It was its fourth cut since October, when it began lowering borrowing costs for the first time in years to support a weakening economy. The bank slashed its 2025 growth outlook to 0.8%, nearly halving its previous projection of 1.5% announced in February. Share prices jumped, with the Kospi gaining 1.7%. Although trade tensions have recently eased, the global economy is still expected to slow due to the lingering effects of increased tariffs. U.S.-China friction over trade and geopolitical uncertainties will continue to weigh on markets, the bank said in a statement. South Korea's domestic economic activity remained sluggish in April following a contraction in the first quarter driven by weak consumption and business investment, the bank said. It said job creation in manufacturing and other sectors was slow. Since beginning his second term, Trump has vowed to slap huge new tariffs on foreign products entering the United States, including those from Mexico, Canada and China, which he insists will create more domestic jobs and shrink the federal deficit. In recent weeks, South Korea has sent trade officials to Washington to discuss the Trump administration's trade measures, including reciprocal tariffs and potential product-specific duties on semiconductors and cars, which are major exports for the country's trade-dependent economy. A decision by a U.S. federal court saying Trump lacks the legal authority to impose such tariffs could upset his plans, but the White House has appealed and it's unclear what will happen in the longer run. Experts say South Korea's leverage in trade talks and its ability to tackle domestic economic challenges have been undermined by political instability after former President Yoon Suk Yeol's ill-fated imposition of martial law in December. Yoon was formally ousted from office in April, setting the stage for a snap presidential election next week.
Associated Press
2 days ago
- Business
- Associated Press
South Korea's central bank cuts borrowing costs to nurse the sluggish economy
SEOUL, South Korea (AP) — South Korea's central bank cut its key interest rate and sharply lowered its growth outlook for the country's economy in 2025, as it moved Thursday to counter U.S. President Donald Trump's tariff hikes and weak domestic demand worsened by recent political turmoil. Following a monetary policy meeting, the Bank of Korea cut its benchmark interest rate by a quarter percentage point to 2.5%. It was its fourth cut since October, when it began lowering borrowing costs for the first time in years to support a weakening economy. The bank slashed its 2025 growth outlook to 0.8%, nearly halving its previous projection of 1.5% announced in February. Share prices jumped, with the Kospi gaining 1.7%. Although trade tensions have recently eased, the global economy is still expected to slow due to the lingering effects of increased tariffs. U.S.-China friction over trade and geopolitical uncertainties will continue to weigh on markets, the bank said in a statement. South Korea's domestic economic activity remained sluggish in April following a contraction in the first quarter driven by weak consumption and business investment, the bank said. It said job creation in manufacturing and other sectors was slow. Since beginning his second term, Trump has vowed to slap huge new tariffs on foreign products entering the United States, including those from Mexico, Canada and China, which he insists will create more domestic jobs and shrink the federal deficit. In recent weeks, South Korea has sent trade officials to Washington to discuss the Trump administration's trade measures, including reciprocal tariffs and potential product-specific duties on semiconductors and cars, which are major exports for the country's trade-dependent economy. A decision by a U.S. federal court saying Trump lacks the legal authority to impose such tariffs could upset his plans, but the White House has appealed and it's unclear what will happen in the longer run. Experts say South Korea's leverage in trade talks and its ability to tackle domestic economic challenges have been undermined by political instability after former President Yoon Suk Yeol's ill-fated imposition of martial law in December. Yoon was formally ousted from office in April, setting the stage for a snap presidential election next week.
