Bank of Korea’s Repo Rate Cut to Record Low of 1.75%

March 12, 2015

The decision to ease was influenced heavily by the incoming tide of other central banks that have cut interest rates and concern that a resulting loss of South Korean price competitiveness could dampen export demand.  Central banks have loosened monetary policy this year in China, India, the euro area, Thailand, Turkey, Indonesia, Israel, Turkey, Poland, Romania, Russia, Singapore, Australia, Canada, Peru, and Sweden.  Those in Japan, Norway, Switzerland, Iceland Chile, Sri Lanka and Serbia also did so within the past half year. 

Today’s 25-basis point reduction of the of the Bank of Korea seven-day repo rate is the fourth reduction of the cycle, following similar cuts in March 2013 and August and October of last year.  A statement released today stresses weaker economic growth than assumed previously and very low inflation.

The Committee expects that the domestic economy will show a modest trend of recovery going forward, although falling short of the originally forecast growth path. The period of continuation of the negative output gap will as a result also be longer than had been anticipated…The Committee forecasts that, due mainly to the effects of the low oil prices, inflation will continue at a level lower than originally expected… The Korean won has depreciated against the US dollar, affected by the dollar’s strength globally and by the synchronization between movements of the won and the Japanese yen following the yen’s weakening.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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