South Korea’s central bank cut policy interest rates for the first time in four and a half years, making a shift away from quashing inflation, currently below its 2 per cent target, to focus on reviving growth.

The Bank of Korea (BOK) lowered its benchmark interest rate by a quarter percentage point to 3.25 per cent at its monetary policy review.

Gross domestic product contracted in the second quarter, private consumption is falling and headline inflation in September undershot the bank’s 2 per cent target.

Concerns over Seoul’s hot housing markets and households ramping up debt had been delaying the bank’s policy pivot, but a cooling in transactions in the last few weeks has given policymakers some room to focus on driving growth.

The move follows policy easing by its peers in Indonesia and the Philippines, after the Federal Reserve kicked off its easing cycle with a half-point cut last month.

The BOK will go slow on any further easing in borrowing costs as restraining property prices and an increase in household debt remain important considerations, analysts said.