Korea Monetary Policy


Central Bank cuts rate in a unexpected move

At its 12 July monetary policy meeting, the Bank of Korea (BoK) unexpectedly cut the Base Rate by 25 basis points, from 3.25% to 3.00%. The decision marked the first policy rate change in a year and the first rate cut since February 2009. The bank cited moderate global economic recovery and intensifying downside risks to growth. In the accompanying statement, the BoK stressed the sluggishness of the Euro area economies, in addition to signs of moderation in emerging markets and a deterioration in the United States. Against this backdrop, the Bank believes that the domestic economy will sustain a negative output gap for a considerable time going forward, due mostly to the increase in euro area risks and the sluggish economies of its major trading partners.


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