South Korea cuts rates, flags worst year for economy since 1998

- Advertisement -
- Advertisement -
- Advertisement -
- Advertisement -

South Korea’s central bank cut interest rates to a record low on Thursday as it warned the coronavirus pandemic would be worse for Asia’s fourth-largest economy than the 2008 global financial crisis.

The Bank of Korea’s board voted unanimously to cut its policy rate by a quarter of a percentage point to 0.5%, the lowest since the bank adopted the current system in 1999. The move was expected by 12 of 19 economists polled by Reuters.

The bank also downgraded its 2020 economic projection to a 0.2% decline from 2.1% growth forecast in February. That would be the biggest contraction since 1998, during the Asian financial crisis.

The BOK also sees inflation at 0.3% this year, down from its February forecast of 1.0%.

Governor Lee Ju-yeol said the bank is ready to ramp up government bond buying to soak up the massive public debt needed to cover the cost of new stimulus.

“We plan to actively purchase treasury bonds to stabilise markets should long-term yield volatility increase,” Lee said in a press conference.

“With the rate cut, the policy interest rate is now very close to the effective lower bound,” Lee added.

That prompted some analyst to expect the easing cycle may have reached its end although Lee declined to comment on whether or not additional easing was needed.

The BOK is working in tandem with the government to extend liquidity to businesses hit by the coronavirus pandemic.

South Korea has rolled out a 245 trillion won ($197.9 billion) package — 12.8% of gross domestic product — to combat the virus fallout. It is also preparing a third supplementary budget after April exports suffered the worst slump in 11 years and jobs vanished at the fastest pace since 1999.

The BOK had previously pledged unlimited liquidity through to June via repurchase agreements and began lending to securities firms for the first time in the its 70-year history.

South Korea’s central bank joins counterparts in the United States, Australia, UK and New Zealand in bond-buying operations to nurse the economy through the pandemic.

This article was originally published on finance.yahoo.com/finance/.
Home of Science
Follow me

- Advertisement -

Discover

Sponsor

Latest

Top Shows of 2020 – These Are the Trends That Are Happening

Top Shows of 2020 - These Are the Trends That Are HappeningThe best movies of 2020 are all in the making and the...

EVENT RECAP: Kirk Franklin’s Sold Out Show at Atlanta’s Symphony Hall!

Kirk Franklin’s new album Long Live Love was just released this past May and it’s already making quite the name for itself. This marks the 13-time...

Oprah and James Monroe

Oprah Winfrey has had her share of good times and bad, she has been a celebrity and then a survivor. She has survived much...

Climate gentrification: How extreme weather is displacing low-income residents from their communities

Sea levels are rising at an alarming rate — and for Miami-Dade County, situated between 4 and 6 feet above sea level and with a...

Is There Any Hope For The Super Bowl?

Is There Any Hope For The Super Bowl?The Super Bowl will be the last one to have more than two competing teams and...
Home of Science
Follow me