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Bank of Korea unexpectedly cuts interest rates by 25 bps

Investing.com– South Korea’s central bank lowered its interest rates by another 25 basis points in a surprise move on Thursday, as the bank warned that economic growth was likely to slow further in the coming year.

The Bank of Korea lowered its benchmark interest rate by a quarter percentage point to 3.00% at its monetary policy review, where it was widely expected to leaves the rate unchanged to support the Korean won against a strong U.S. dollar.

The rate cut comes as policymakers aim to bolster a sluggish economy that narrowly avoided a technical recession earlier this year. South Korea’s third-quarter gross domestic product expanded by only 0.1% quarter-on-quarter, weighed down by declining exports and tepid consumer spending.

The central bank expects slower GDP growth in 2025 of 1.9%, compared to its August forecast of 2.1%. It also sees consumer price index inflation at 1.9% in 2025, down from its 2.1% prior estimate.

The South Korean won weakened sharply on Thursday, with the USD/KRW pair up 0.5% after the BoK’s decision.

The central bank had cut interest rates for the first time since mid-2020 in October, and said that there was room for further easing. Lower interest rates offer some relief to households that have faced the highest borrowing costs in 16 years.

This post appeared first on investing.com

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