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The Bank of Korea has cut its benchmark interest rate by a quarter percentage point to 3% to support a slowing economy, revising its growth forecasts down to 2.2% for 2024 and 1.9% for 2025. This marks the second consecutive month of rate cuts amid high inflation and rising household debt, as global economic uncertainties persist. The bank's actions follow a previous cut in October, the first since May 2020, as concerns grow over the impact of new U.S. tariffs and geopolitical tensions.
South Korea's central bank unexpectedly cut its benchmark interest rate by 25 basis points to 3%, marking the first consecutive cuts since 2009. This decision follows a weaker-than-expected GDP growth of 1.5% in the third quarter and a reduction in the GDP forecast for 2024 to 2.2%. Inflation has also slowed, with October's rate at 1.3%, the lowest since February 2021.
The Bank of Korea unexpectedly cut its benchmark interest rate by a quarter-percentage point to 3%, responding to heightened trade and economic concerns following Donald Trump's presidential election victory. This move comes alongside a revision of growth forecasts, indicating a cautious outlook for the economy.
South Koreans' economic outlook has sharply declined, with consumer expectations dropping seven points to 74 in November, marking the steepest fall since summer 2022. This decline follows the US election victory of Donald Trump and reflects growing concerns amid global interest rate hikes aimed at combating inflation.
Goldman Sachs anticipates a cautious approach from Asia's central banks regarding interest rate cuts, influenced by the strength of the US dollar and potential tariffs from the Trump administration. The Bank of Korea is expected to refrain from further rate reductions this week, while Indonesian officials have indicated limited capacity for lowering borrowing costs due to US political developments.
A recent Bank of Korea survey reveals that 56% of local financiers and experts are concerned about potential US policy changes following Donald Trump's decisive election victory. This concern ranks as the second highest risk for South Korea, just behind the issue of elevated household debt.
South Korea"s household debt surged by 18 trillion won ($12.9 billion) in the July-September period, marking the largest increase in three years. This rise in total household credit, driven significantly by mortgage loans, influenced the central bank"s policy decisions until last month.
Apartment prices in Seoul have declined for the first time in nine months, with a 0.01% drop in September compared to August. This decrease supports the Bank of Korea's recent interest rate cut and indicates a potential acceleration of monetary easing in the coming year.
South Korea's economy recorded a modest growth of 0.1% in the third quarter, following a 0.2% contraction in the previous quarter. This growth fell short of economists' expectations of a 0.4% increase, highlighting concerns over a weakening export rally and rising geopolitical tensions.
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