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
Home of Science
Follow me

Latest posts by Home of Science (see all)
- Advertisement -




Ben Boulos: ‘Why I changed my name from Bland’on February 19, 2021 at 11:47 am

The name helped his family escape prejudice. But for the BBC’s Ben Boulos, it is time for a change.image copyrightBen BoulosThe BBC's Ben Boulos...

Billionaire Zhou Takes on Jack Ma, Tencent in China’s Online Loan Market

Billionaire Zhou Hongyi is making a grab for a share of China’s lucrative online lending market, which is dominated by Jack Ma’s Ant Financial...

How to Get Super Bowl Tickets

All over the country, Super Bowl fans are all looking forward to the Super Bowl 2020. There will be one in Miami and New...

What Makes A Good Mesothelioma Attorney?

Many of the most experienced mesothelioma attorneys are able to bring a strong case for their clients. This is why the best mesothelioma cases...

Fernando Alonso: Two-time Formula 1 champion involved in road accident while cyclingon February 11, 2021 at 9:03 pm

Two-time champion Fernando Alonso has been involved in a road accident while cycling in Switzerland.Two-time champion Fernando Alonso has been involved in a road...
Home of Science
Follow me
Latest posts by Home of Science (see all)