BOK Chief Indicates Flexibility in Interest Rate Cuts Amid Political and Economic Challenges
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Seoul, Jan 2 (NationPress) The central bank of South Korea is prepared to adjust its key interest rates flexibly in the future, considering the current political instability and economic slowdown, as stated by its governor on Thursday.
In his New Year address, Bank of Korea (BOK) Governor Rhee Chang-yong emphasized that the bank will make decisions regarding its key rate with a close watch on potential risks associated with the prevailing political and economic uncertainties, according to reports from Yonhap news agency.
In November, the bank decreased its benchmark interest rate by a quarter-percentage point, marking the second consecutive reduction to a rate of 3 percent. This move came with indications of further possible cuts, following a revision of growth forecasts amid declining exports and the uncertainties linked to the upcoming Donald Trump administration.
This reduction was the first consecutive rate cut since February 2009, during which the nation was grappling with the repercussions of the global financial crisis.
The BOK is set to convene for its rate-setting meetings this month and next, amidst escalating uncertainties related to President Yoon Suk Yeol’s brief imposition of martial law and subsequent impeachment.
Additionally, fluctuating currency rates and an economic slowdown, along with the policy shifts expected from the incoming Trump administration, present further challenges to the fourth-largest economy in Asia.
The Korean won has depreciated to its lowest value in over a decade against the U.S. dollar, compounded by a tragic airplane crash that has further dampened already weak consumer spending.
In light of these factors, the finance ministry predicts that the economy will grow by 1.8 percent this year, a decrease from last year's estimated growth rate of 2.1 percent. This year's growth forecast is significantly lower than the earlier estimate of 2.6 percent.
Rhee cautioned that prolonged political risks could adversely impact the nation's credit rating, while adding that acting President Choi Sang-mok’s appointments of two justices to the Constitutional Court could help stabilize both the financial market and the economy.
