Bank of Korea lowers benchmark interest rate by 0.25% point

The Bank of Korea (BOK) decided to cut the benchmark interest rate by 0.25%, concluding its monetary tightening that had continued for the past three years and two months and switching to a monetary easing stance.

On Friday, the BOK Monetary Policy Board held a meeting at its headquarters in Seoul and announced that the benchmark interest rate will be cut to 3.25% annually from the current 3.50%. This marks the end of the monetary tightening that has continued for 38 months since August 2021. Six of the seven board members agreed to the cut, with only one member, Jang Yong-seong, presenting the dissenting opinion of freezing the rate.

BOK Governor Rhee Chang-yong provided the rationale behind the cut as an increased need for monetary easing due to heightened uncertainties surrounding the growth outlook. The big rate cut of 0.5% point by the U.S. Fed in September, which helped narrow the interest rate gap between Korea and the U.S., gave some policy leeway to the BOK.

However, the BOK noted that it would be more prudent to further rate cuts in the future. Calling the move a "hawkish cut this time," Governor Rhee said that Korea's benchmark interest rate may likely be retained for a while until the financial index becomes more stable.


이동훈 기자 dhlee@donga.com