Financial News: Bank Of Korea Cuts Policy Rate By 25

Bank Of Korea Cuts Policy Rate By 25 Bps

05/29/2025 - 01:00:00 (RTTNews)

(RTTNews) - The Bank of Korea lowered its benchmark rate by a quarter-point to mitigate downside pressure on the economy.

The monetary policy board, governed by Rhee Chang Yong, unanimously decided to cut the Base Rate by 25 basis points to 2.50 percent.

The bank had previously reduced the benchmark rate by a quarter-point in February.

The board observed that domestic demand is likely to recover modestly, but at a slower pace, while exports are expected to slow further due to the impact of U.S. tariffs. Growth was forecast at 0.8 percent for this year, which was considerably below the February projection of 1.5 percent.

The board noted that the future growth trajectory is assessed to be subject to significant uncertainty, stemming from developments in trade negotiations, government stimulus measures, and monetary policies in major economies.

Consumer price inflation is forecast to be consistent with the February forecast of 1.9 percent this year. Core inflation is expected to be 1.9 percent but slightly above the previous forecast.

"Regarding future monetary policy, given the deteriorating economic outlook, future rate cuts could be larger than previously assumed," the bank said.

"However, the Board will determine the timing and the pace of further cuts to the Base Rate based on incoming economic data since there are both upside and downside risk factors in economic forecasts, and it is necessary to be cautious regarding financial stability risks," the bank added.

ING economist Min Joo Kang said the focus is on fostering growth rather than anchoring inflation.

Although the bank appeared to be strengthening its easing stance, it remains cautious, the bank said. The economist expects a total of 50 basis points cut in the second half of the year.

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