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South Korea cuts policy rate to record low on external uncertainties

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Christian Fernsby ▼ | October 16, 2019
South Korea's central bank cut its policy rate to a record low amid growing concerns about external uncertainties, after lowering it by 25 basis points three months earlier.
South Korea oil ship
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Bank of Korea (BOK) Governor Lee Ju-yeol and six other policy board members decided to lower the benchmark 7-day repurchase rate from 1.50 percent to an all-time low of 1.25 percent.

Topics: South Korea rate

The central bankers slashed the target rate by a quarter percentage point in July.

The rate cut was in line with market expectations. According to a Korea Financial Investment Association (KFIA) poll of 200 fixed-income experts, 65 percent predicted a more accommodative monetary policy.

The BOK signaled a rate cut at the previous rate-setting meeting in August, when two of the seven monetary policy board members claimed a 25-basis-point rate cut.

The U.S. Federal Reserve lowered its target rate from a range of 2.00-2.25 percent to 1.75-2.00 percent last month, leaving open a room for the BOK's more accommodative monetary policy.

Economic indicators painted a gloomy picture due mainly to external uncertainties such as the global trade dispute and the continued downturn in business cycle of the global semiconductor industry.

Export, which accounts for about half of the export-driven economy, kept falling for 10 straight months to September.

The International Monetary Fund (IMF) revised down its 2019 growth outlook for the South Korean economy to 2.0 percent from 2.6 percent estimated six months earlier. The 2020 growth forecast was also slashed from 2.8 percent to 2.2 percent.

The Organization for Economic Cooperation and Development (OECD) downgraded this year's growth outlook for the South Korean economy from 2.4 percent to 2.1 percent last month, while the BOK lowered its growth forecast from 2.5 percent to 2.2 percent in July.