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Korea Herald
a day ago
- Business
- Korea Herald
[Photo News] BOK–Fed talks on digital finance
Bank of Korea Gov. Rhee Chang-yong (left) and Christopher Waller, a member of the US Federal Reserve Board of Governors, hold a policy dialogue during the 2025 BOK International Conference at the central bank's headquarters in Seoul on Monday. The two policymakers discussed the outlook for stablecoins and central bank digital currencies, and how such digital assets could reshape the global financial system.(Yonhap)
Korea Herald
5 days ago
- Business
- Korea Herald
BOK slashes growth forecast by half to 0.8%
Korea faces slowest growth since 2009 as central bank cuts rates to spur recovery South Korea's central bank nearly halved its economic growth projection for this year to 0.8 percent on Thursday, reflecting deepening challenges both at home and abroad. In a bid to support the struggling economy, the Bank of Korea also delivered a quarter-point base rate cut. The revised estimate for gross domestic product growth, a key measure of economic performance, is down 0.7 percentage point from the BOK's previous forecast of 1.5 percent made in February. The downgrade factors in the 0.2 percent economic contraction in the first quarter and heightened trade risks, including US tariff actions. If realized, this would mark the first time since 2009 that the nation's growth rate falls below 2 percent, excluding the pandemic-triggered contraction in 2020. The last instance was when the GDP rose by 0.8 percent in 2009, hit by the global financial crisis. 'The economy is facing challenges, but it's difficult to compare the current situation to that of 2008,' BOK Governor Rhee Chang-yong said at a press conference following the Monetary Policy Board meeting. 'At that time, Korea's potential growth rate was around 3 percent. Now, it has fallen to 2 percent. A 0.8 percent growth is certainly painful, but it's not a crisis on the scale of 2008.' The BOK's revised projection aligns with recent adjustments from other institutions. The Korea Development Institute, for instance, also halved its growth outlook from 1.6 percent to 0.8 percent. Despite the downgrade for 2025, the BOK trimmed next year's growth forecast by just 0.2 percentage point to 1.6 percent, suggesting an anticipated recovery. 'Over the past two years, construction investment has been the biggest drag on growth,' said Rhee. 'The sector had overheated during the real estate boom and is now undergoing a sharp correction, which we expect to stabilize within this year.' The BOK maintained its inflation outlook for 2025 at 1.9 percent, signaling that consumer prices are expected to follow a stable trajectory despite slower growth. To stimulate economic activity, the central bank lowered the base rate by 0.25 percentage point to 2.5 percent. This marks the fourth rate cut since the BOK began easing in October 2024. All six voting members of the Monetary Policy Board supported the rate cut, excluding Governor Rhee, whose vote is not disclosed. Four of the six members were open to further easing within the next three months, while the remaining two expressed opposition. With the latest decision, the interest rate gap between South Korea and the US has widened to 2 percentage points. However, the recent appreciation of the Korean won has helped mitigate concerns over capital outflows and foreign exchange volatility. 'The won's earlier depreciation was excessive compared to the underlying fundamentals of the Korean economy. Its current appreciation is a normalization process,' said Rhee. Attention now turns to the US Federal Reserve's upcoming Federal Open Market Committee meeting scheduled for June 17-18. The next BOK rate-setting meeting will be held on July 10.
Time of India
6 days ago
- Business
- Time of India
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. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Yahoo
27-05-2025
- Business
- Yahoo
Bank of Korea to cut rate on May 29, more easing ahead: Reuters poll
By Rahul Trivedi BENGALURU (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 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) Sign in to access your portfolio
Korea Herald
26-05-2025
- Business
- Korea Herald
Won hits 7-month high, paving way for BOK rate cut
All eyes on BOK's Thursday meeting as policymakers weigh 0.25 percentage point cut The Korean won climbed into the 1,360-won range on Monday, gaining value against the US dollar to reach a seven-month high at the opening quote. With the local currency strengthening, the Bank of Korea is expected to carry out a rate cut this week. The won was quoted at 1,369 per dollar as the market opened Monday, strengthening by 2.5 won from the previous after-hours trading session. It marked the strongest opening value of the won against the dollar since October. After briefly weakening to 1,371 won during early trading, the won reversed course and strengthened to 1,360.5 won per dollar — its strongest intraday level since reaching 1,355.9 won on Oct. 15. As of 2 p.m., the won was trading at 1,363.45 per dollar. In recent weeks, the won has been gaining momentum as markets anticipate that Korean foreign exchange authorities may allow its appreciation as part of broader trade talks with the US. Between May 16 and 23, the won appreciated by 2.45 percent in terms of after-hours closing prices, making it the second-strongest-performing currency among major economies during that period. The Swedish krona posted the largest gain, rising 2.51 percent. While a news report in local The Korea Economic Daily Wednesday suggested that the US had requested Korea to implement measures to strengthen the won as part of trade talks, Korean forex authorities denied the claim. 'The two countries share a mutual understanding on the principles of forex market operations and exchange rate policies and are discussing a range of negotiation agendas,' the Finance Ministry said Thursday. 'Nothing has been specifically decided at this stage, and discussions are still ongoing.' Meanwhile, the won's recent appreciation provides the Bank of Korea with more room to cut its base rate by 0.25 percentage point, which currently stands at 2.75 percent. The central bank has been under pressure to ease monetary policy to support the economy, which contracted by 0.2 percent in the first quarter of this year. While BOK Governor Rhee Chang-yong has previously cited currency volatility as a key concern, the recent strengthening of the won could ease that pressure and open the path to a rate cut. 'With strong downward pressure on the economy, the BOK is likely to leave the door open for further rate reductions even after implementing a cut this week,' said Ahn Ye-ha, an analyst at Kiwoom Securities.
