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Financial News: Bank Of Korea Cuts Key Rate At Emergency

Bank Of Korea Cuts Key Rate At Emergency Meeting

03/16/2020 - 06:48:00 (RTTNews)

(RTTNews) - South Korea's central bank lowered its interest rate to a record low and unveiled measures to strengthen liquidity in the financial market, on Monday.

At an unscheduled meeting, the Monetary Policy Board of the Bank of Korea decided to cut the base rate by 50 basis points to 0.75 percent. The rates will take effect on March 17.

The board assessed that further monetary policy accommodation is required to ease volatility in the financial markets and reduce the effects on future economic growth and inflation.

The board also decided to lower the interest rate on the Bank Intermediated Lending Support Facility to 0.25 percent from 0.50-0.75 percent.

This action is expected to strengthen the incentives for banks to lend to SMEs, alleviating the interest burden of SMEs and improving their financial conditions.

Further, the board broadened the eligible collateral for open market operations to include bank financial debentures that are not credit risk-free.

For risk management purposes, the central bank will set the margin ratios on debt securities whose credit risk is higher than those of government securities. These measures will be effective on April 1, 2020.

The Bank of Korea's announcement came after the US Federal Reserve together with other five central bank, on Sunday, decided to provide monetary stimulus to the world economy by boosting liquidity amid a global financial market crash as the coronavirus, or Covid-19, raised fears of a severe global recession.

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