<\/p>\n
South Korea\u2019s central bank cut rates by 25 basis points Tuesday to their lowest since August 2022, as it strives to stimulate a slowing economy.<\/p>\n
The Bank of Korea reduced rates to 2.75% from 3%, in line with expectations from economists, trimming them for the third time in four meetings.<\/p>\n
The central bank said the decision was taken to mitigate downward pressure on the economy, forecasting growth to \u201cdecline significantly.\u201d<\/p>\n
The BOK cut its 2025 growth outlook to 1.5% from its 1.9% forecast in November, saying that domestic demand recovery and export growth are likely to be lower than expected due to deteriorating economic sentiment and U.S. tariff policies.<\/p>\n
It acknowledged that concerns about foreign exchange markets still remain, but added inflation had stabilized while household debt growth had slowed.<\/p>\n
The BOK maintained its 1.9% inflation forecast for 2025, while the core inflation outlook was lowered to 1.8% from 1.9% in November.<\/p>\n
The decision comes as South Korea continues to grapple with political uncertainty over.<\/p>\n
South Korea\u2019s GDP growth in the fourth quarter missed expectations, clocking its slowest expansion in six quarters at 1.2%, according to advance estimates. The BOK attributed the slowdown to weakness in consumption and construction sectors.<\/p>\n
The widening of the rate spread between the U.S. dollar and South Korean won has not seen a meaningful bond capital outflow, Citi said in a note earlier this month, which sees a \u201climited negative impact\u201d of weakness in the South Korean won on the country\u2019s financial industry and foreign capital flows.<\/p>\n
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