The Korea Times close
National
  • Politics
  • Diplomacy
  • Defense
  • Labor & Environment
  • Law & Crime
  • Health & Welfare
  • Embassy
  • Seoul & Provinces
  • Education
  • Foreign Communities
  • Obituaries
  • Multicultural Youth Award
Biz & Tech
  • Auto
  • IT
  • Game
  • Manufacturing
  • Retail & Food
  • Energy
  • Construction
  • Airlines
Finance
  • Policies
  • Economy
  • Markets
  • Banks
  • Non-banks
Opinion
  • Editorial
  • Columns
  • Thoughts of the Times
  • Cartoon
  • Today in History
  • Blogs
  • Tribune Service
  • Blondie & Garfield
Lifestyle
  • Arts
  • Books
  • Travel & Cuisine
  • Trend
  • Fashion
  • Around Town
  • Fortune Telling
  • Translation Award
Entertainment
  • K-pop
  • K-dramas & Shows
  • Movies
  • Music
  • Performances
  • Asia Model Festival
Sports
  • Football
  • Golf
  • Baseball
  • Other Sports
World
  • Asia Pacific
  • Americas
  • Europe & Africa
  • SCMP
Video
  • On the Spot
  • Feature
  • News
Photos
  • Photo News
  • Darkroom
Community
  • The Korea Times
  • all menu
  • search
  • facebookfacebook
  • twittertwitter
  • youtubeyoutube
  • Site Map
  • E-paper
  • Subscribe
  • Register
  • LogIn
search close
  • The Korea Times
  • all menu
  • search
  • facebookfacebook
  • twittertwitter
  • youtubeyoutube
  • Site Map
  • E-paper
  • Subscribe
  • Register
  • LogIn
search close
Finance
  • Policies
  • Economy
  • Markets
  • Banks
  • Non-banks
Sun, December 8, 2019 | 04:00
Policies
BOK cuts key interest rate to 1.5 percent
Posted : 2019-07-18 17:09
Updated : 2019-11-24 16:38
Lee Kyung-min
Mail
Print Preview
Font Size Up
Font Size Down
2019 Growth rate revised down to 2.2%

By Lee Kyung-min

The Bank of Korea (BOK) cut its key interest rate by 25 basis points to 1.5 percent Thursday, in a pre-emptive measure to tackle slowing growth amid growing uncertainties caused by a trade feud with Japan.

The central bank also revised its 2019 growth outlook to 2.2 percent from its previous forecast of 2.5 percent made in April.

The surprise rate reduction, the first since June 2016, came as Asia's fourth-largest economy faces growing downside risks due to a series of headwinds, such as a prolonged U.S.-China trade feud and Japan's export restrictions on Korea coupled with sluggish exports and investment here.

The central bank had kept the benchmark rate unchanged since November, when it hiked it by 25 basis points to 1.75 percent.

The BOK said there has been a growing need for a more accommodative stance following escalating trade disputes and a delayed recovery in the semiconductor sector.

. Bank of Korea Governor Lee Ju-yeol speaks during a press conference at the central bank's headquarters in Seoul, July 18. Courtesy of Bank of Korea
It added that the newly emerging row between Korea and Japan over Tokyo's export restrictions on key materials needed for the manufacture of semiconductors and display panels was weighing on the Korean economy.

Japan supplies up to 90 percent of the key resource materials worldwide and Korea makes about 60 percent of the world's chips.

"The outcome of the U.S.-China trade dispute, which continues to remain uncertain, and the fresh one between Korea and Japan are posing major risks to the country's economic growth," BOK Governor Lee Ju-yeol said at a press conference in Seoul.

"We therefore judged that the need to support economic recovery has substantially increased since we last made a forecast in April."

The BOK said it is carefully monitoring the possible spread of global trade protectionism, changes in the monetary policies of major countries and other geopolitical risks.

Factored into the BOK rate cut were remarks made by U.S. Federal Reserve Chairman Jerome Powell whose notable dovish turn has fueled market anticipation of a cut of at least 25 basis points at the upcoming Federal Open Market Committee (FOMC) meeting scheduled for July 31.

On June 4, Powell hinted at a rate cut saying the U.S. central bank was "prepared to act" if the ongoing trade wars with China and other nations continue.

The BOK forecast that the Korean economy will grow by 2.5 percent in 2020. It expects the economy will add 200,000 new jobs in 2019 and 180,000 in 2020.

The current account is forecast to record a surplus of $59 billion (69 trillion won) in 2019 and $58.5 billion in 2020.

The central bank estimated Korea's potential growth rate will be between 2.5 and 2.6 percent in 2019 and 2020.

Global investment banks and credit ratings agencies have already reduced their forecasts for Korea's growth over the last few weeks.

Some organizations predicted the rate will fall below 2 percent, a far bleaker forecast than the finance ministry's outlook of between a range of 2.4 percent and 2.5 percent.

Morgan Stanley sees the Korean economy growing 1.8 percent in 2019. ING Group and Nomura Securities also lowered their growth rate projections to 1.5 percent and 1.8 percent, respectively.

Credit rating agencies ― Fitch, Moody's and Standard & Poor's ― lowered their forecasts for Korea's growth to between 2 percent and 2.1 percent.

Sung Tae-yoon, an economist at Yonsei University, said the country will continue to experience a prolonged slowdown.

"The outlook downgrade and the key rate cut were well-warranted by the worse-than-expected slowdown in investment and exports. If the trade dispute with Japan escalates, the BOK may consider another rate cut within this year," he said.


Emaillkm@koreatimes.co.kr Article ListMore articles by this reporter
Skepticism growing over Korean economy
A growing number of experts worldwide are expressing skepticism about the government's rosy outlook for the country's economic growth for 2019. Contrary to the Ministry of Economy ...
'Japan's export control to further strain Korean economy'
Japan's export control of key materials needed to produce semiconductors and displays will deal a significant blow to Asia's fourth-largest economy, economists said Friday. ...








 
 
  • numberSeoul's changing face: A glimpse of the 1920-30s city
  • numberWartime documents show Japan's role in recruiting comfort women: Kyodo
  • numberIndian woman who alleged gang-rape dies after burn attack
  • numberMoon, Trump agree on need to maintain dialogue momentum over North Korea
  • numberSwine fever-infected wild boars on steady rise in Korea
  • numberUS has not yet decided whether to hold UN meeting on North Korea rights abuses
  • numberSlain Maltese reporter lived in fear, family says
  • numberPet-caused fires on rise in Seoul: data
  • numberChina hopes to 'strengthen cooperation' with Hong Kong police
  • numberKorean figure skater Lee Hae-in finishes 5th in Junior Grand Prix Final
  • Red-hot 'Frozen 2' melts records in Korea Red-hot 'Frozen 2' melts records in Korea
  • Actor Lee Si-eon turns to serious character in thriller film 'Killed My Wife' Actor Lee Si-eon turns to serious character in thriller film 'Killed My Wife'
  • Korean pop culture producers eyeing Southeast Asia Korean pop culture producers eyeing Southeast Asia
  • BTS' 'Boy with Luv' most-viewed YouTube music video in Korea in 2019 BTS' 'Boy with Luv' most-viewed YouTube music video in Korea in 2019
  • Disney's 'Frozen 2' tops 10 mil. admissions in Korea Disney's 'Frozen 2' tops 10 mil. admissions in Korea
DARKROOM
  • Global climate change: time is running out

    Global climate change: time is running out

  • CA cave fire burns more than 4,300 acres

    CA cave fire burns more than 4,300 acres

  • No money, no hope: South Korea's 'Dirt Spoons'

    No money, no hope: South Korea's 'Dirt Spoons'

  • Hong Kong democrats score historic victory

    Hong Kong democrats score historic victory

  • Halloween

    Halloween

  • About Korea Times
  • CEO Message
  • Times History
  • Content Sales
  • Media Kit
  • Contact Us
  • Location
  • Privacy Statement
  • Terms of Service
  • Mobile Service
  • RSS Service
  • Ombudsman
  • hankookilbo
  • Dongwha Group
  • Code of Ethics
Copyright