Korea: Central Bank trims rate to prop up the economy
October 11, 2012
At its 11 October monetary policy meeting, the Bank of Korea (BoK) cut the Base Rate by 25 basis points, from 3.00% to 2.75%. The decision was in line with market expectations and marked the second cut this year. The move aims at buttressing economic activity, amid slowing domestic demand and slumping exports, as Europe slides further into recession and the U.S. shows signs of weakening. In the accompanying statement, the BoK referred to the deepening of the Euro area crisis, in addition to a weak recovery in the United States. Against this backdrop, the Bank reiterated that "the negative output gap in the domestic economy will be sustained for a considerable time going forward, due mostly to the prolongation of the euro area fiscal crisis and to the sluggishness of the global economy". In addition, the Bank expects inflation to remain below the 3.0% target for the time being amid easing demand side pressures.