[News Today] BOK CUTS KEY RATE TO 2.75%

[LEAD]
The Bank of Korea has cut the key interest rate to 2.75%. Facing challenges both home and abroad, the central bank deemed the reduction necessary.

[REPORT]
The nation's key interest rate has been lowered to below 3% for the first time in two years and four months.

In October 2022, when the COVID-19 pandemic was almost over and prices began to soar, the key rate was raised to 3.5%. It stayed in the 3% range for a while before it was slashed again to 2.75% on Tuesday.

The decision was reached unanimously by the seven members of the BOK's monetary policy board.

The gap with the U.S. base rate has widened further to 1.75 percentage points and there is pressure associated with currency exchange rates.

But the central bank decided to cut the rate nonetheless due to downward pressure on the economy.

It noted that domestic consumption is affected by political instability, while exports face uncertainty due to the Trump administration's trade policies.

Rhee Chang-yong / Governor, Bank Of Korea
The base rate needs to be cut further to mitigate downward pressure on economy.

The BOK has also slashed the nation's economic growth outlook for this year.

It once predicted the economy to expand 2.3% in 2025 but the outlook was lowered multiple times and was eventually cut to 1.5%.

That's 0.8 percentage points lower than the highest outlook. That simply equates to an annual GDP loss of 18 trillion won, or about 12.6 billion dollars.

The central bank says if the U.S. steps up tariff pressure, Korea's economic growth could fall to 1.4% this year.

The BOK chief once again dismissed claims of missing the right timing for a rate cut.

Shortly after the rate cut, financial authorities began to urge commercial banks to reflect the lower key rate in loan interest rates.