{"id":2206780,"date":"2024-10-11T17:08:04","date_gmt":"2024-10-11T08:08:04","guid":{"rendered":"https:\/\/koreapro.org\/?p=2206780"},"modified":"2024-10-14T17:57:00","modified_gmt":"2024-10-14T08:57:00","slug":"south-koreas-central-bank-cuts-interest-rates-to-boost-economy-and-exports","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2024\/10\/south-koreas-central-bank-cuts-interest-rates-to-boost-economy-and-exports\/","title":{"rendered":"South Korea\u2019s central bank cuts interest rates to boost economy and exports"},"content":{"rendered":"
The Bank of Korea (BOK) <\/span>cut its benchmark interest rate<\/span><\/a> on Friday by 0.25 percentage points, lowering the rate to 3.25% in its first rate cut in over three years.\u00a0<\/span><\/p>\n While the move aims to support South Korea\u2019s sluggish domestic economy and boost exports, it comes with a set of risks related to financial stability, inflation and the housing market.<\/span><\/p>\n The central bank\u2019s decision reflects the challenges it faces in addressing short-term economic needs and long-term financial risks.<\/span><\/p>\n ECONOMIC BACKDROP<\/b><\/p>\n The BOK\u2019s rate cut follows a prolonged period of monetary tightening that began in 2021. At the time, the central bank raised rates to <\/span>curb inflation<\/span><\/a> and control rising household debt, which resulted from the pandemic.<\/span><\/p>\n This strategy aligned with global trends, as other major central banks, including the U.S. Federal Reserve, also <\/span>raised rates<\/span><\/a> to manage inflation. However, as inflationary pressures eased and domestic economic growth slowed, the BOK signaled a shift toward a more accommodative policy stance.<\/span><\/p>\n The South Korean economy has faced several challenges in 2024. Despite <\/span>strong export performance<\/span><\/a>, domestic consumption has been <\/span>weak<\/span><\/a>, and the construction sector has <\/span>struggled<\/span><\/a>. South Korea\u2019s real GDP decreased by 0.2% quarter-on-quarter, reflecting stagnation in domestic demand.<\/span><\/p>\n However, inflation, which had been a major concern, has <\/span>moderated to 1.6%<\/span><\/a> in September, forcing the BOK to adjust its policy as its priority shifted from managing inflation to boosting growth.\u00a0<\/span><\/p>\n