South Korean Central Bank Rate Cut after Big Downward Growth Forecast Revision

May 28, 2020

Another central bank interest rate cut was announced today, this time by the Bank of Korea, where by a unanimous decision the 7-day repo rate was lowered 25 basis points to 0.50%. This was the second cut of 2020 following a 50-basis point reduction back in March. The 0.50% level represents what officials have considered an “effective” floor. A released statement explaining today’s action includes a sharp downward revision of projected 2020 growth from 2.1% previously to around zero percent. “Consumer price inflation and core inflation are forecast to run at the lower-0% and mid-0% level this year, respectively, due to the drop in global oil prices and weakening demand-side inflationary pressures.” The statement from the central bank Board promises to “maintain its accommodative monetary policy stance” without getting into specifics if additional interest rate cuts are not a likely tool.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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