BOK cuts rate to 2.25% as expected

By 이현정
  • Published : Aug 14, 2014 - 10:16
  • Updated : Aug 14, 2014 - 10:43
In a widely expected move, South Korea's central bank on Thursday lowered the policy interest rate to 2.25 percent in a coordinated effort to prop up flagging consumption and sentiment.

The decision, which marks the first rate cut since May 2013, is in line with a poll conducted by Yonhap Infomax, the financial news arm of Yonhap News Agency. Twenty-one out of 23 analysts had projected the central bank would cut the rate in the face of growing pressure from the government and lawmakers, while the other two analysts had forecasted a rate freeze.

As soon as Finance Minister Choi Kyung-hwan was nominated on June 13, the market had been betting on the Bank of Korea (BOK) cutting the rate for the first time in over a year to lend support to his aggressive growth initiative.

BOK Governor Lee Ju-yeol (Bloomberg)

Under the so-called "Choinomics," the finance minister last month unveiled a 40 trillion won (US$38.9 billion) stimulus package aimed at propping up flagging consumption that took a hit from the deadly Sewol ferry disaster.

The central bank has also taken part in the full-fledged policy initiative by expanding its loan instrument for companies to 15 trillion won from 12 trillion won.

Last month's rate-setting meeting, in which BOK Governor Lee Ju-yeol mentioned "growing downside risks" and board member Chung Hae-bang voted for a rate cut, had also fueled speculation of a rate cut. (Yonhap)