BOK Gov. Rhee Chang-yong bans the gavel at a monetary policy board meeting held Tuesday. (Joint Press Corps)
BOK Gov. Rhee Chang-yong bans the gavel at a monetary policy board meeting held Tuesday. (Joint Press Corps)

South Korea's central bank delivered a quarter-point cut on Thursday, on the back of the won's recent appreciation.

The Bank of Korea cut the base rate by 0.25 percentage point, lowering it to 2.5 percent. With the decision, the gap between Korea's key rate and the US rate has widened from 1.75 percentage points to 2 percentage points.

The BOK implemented a rate cut, supported by recent strength in the Korean won against the greenback.

While a wider interest rate gap raises concerns over capital outflows and forex market volatility, the won’s recent appreciation has mitigated these pressures.

With the rate cut, the central bank also slashed the projection for this year’s gross domestic product growth from 1.5 percent to 0.8 percent.

The BOK’s renewed projection is similar to estimates suggested by other institutions. The Korea Development Institute also halved its projection for this year from 1.6 percent to 0.8 percent.

The next rate-setting meeting is scheduled for July 10.


silverstar@heraldcorp.com