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S.Korea’s C.bank cuts main rate on slowdown fears, global risks

S.Korea’s C.bank cuts main rate on slowdown fears, global risks

Mubasher: South Korea’s central bank slashed its benchmark interest rate on Wednesday, to its lowest level in two years, in an attempt to boost the stuttering Asian economy, on which a trade feud with Japan took a heavy toll, Agence France Presse (AFP) reported.

The Bank of Korea’s (BoK) monetary policy board decided to cut the 7-day base rate to 1.25%, from 1.50% in a 5-2 vote.

This was the second rate cut to be delivered in three months, citing contraction of global trade and “sluggishness in exports and facilities investment.”

The move also came heightened deflationary pressures as well as sluggish economic growth, with weakening consumption and plunging exports.

The BoK projected growth this to “fall below” the 2.2% forecasts made last July, from earlier estimate of 2.5%, citing the protracted trade conflict between the US and China along with mounting geopolitical risks.

“As it is expected that domestic economic growth will be moderate and it is forecast that inflationary pressures on the demand side will remain at a low level, the Board will maintain its accommodative monetary policy stance,” the central bank’s statement was quoted by AFP.

Asia’s fourth biggest economy grew by 2.7% last year, which was the weakest pace since six years.

Moreover, consumer price inflation is set to close nearly zero “for some time” before hitting 1% range as from next year, still far from its targeted 2%.

Analysts warned that South Korea may be on course to deflation territory, with consumer prices falling by 0.4% on year last September.

South Korea and Japan have been embroiled in a standoff originating from historical row, since last July, after Tokyo made tougher restrictions on three essential chemicals used by tech firms, including Samsung, in manufacturing major products.