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BOK cuts key rate to 1.5% amid uncertainties

South Korea’s central bank on Thursday cut the nation’s policy rate to 1.5 percent, amid mounting external uncertainties, officials have announced.

It also decided to sharply slash the country's growth pace this year by 0.3 percentage point to 2.2 percent from 2.5 percent.

Bank of Korea Gov. Lee Ju-yeol chairs the Monetary Policy Board meeting Thursday. (Yonhap)
Bank of Korea Gov. Lee Ju-yeol chairs the Monetary Policy Board meeting Thursday. (Yonhap)

The Bank of Korea held its rate-setting Monetary Policy Board and decided to cut the base interest rate by 25 basis points to 1.5 percent.

The rate cut decision came a step earlier than the US Fed’s largely anticipated move to cut its own rate later this year.

It also was delivered against the widespread anticipation that Seoul’s monetary policymakers would cautiously maintain a wait-and-see stance this month and make a move after the Fed’s announcement.

According to an earlier survey conducted by the Korea Financial Investment Association upon 200 bond experts here, 70 percent of the respondents predicted a rate freeze this month.

The BOK’s preemptive rate change was seen as reflecting the escalating concerns upon the slow recovery of the nation’s backbone chip business and the impact of Japan’s latest export curbs.

In its earlier April forecast, the BOK predicted that semiconductor exports would rebound in the second half of the year, but July figures so far have not borne that notion out.

Korea Customs Service data showed that exports totaled $13.56 billion as of July 10, down 2.6 percent from the same period last year. The daily average, considering the actual days of operation, was $1.6 billion, down 14 percent from a year prior.

External uncertainties have also continued to weigh down upon the global economy.

While trade tensions between the United States and China have subsided to a certain extent since the Group of 20 summit last month, Japan’s recent export regulations on key high-tech materials have risen as a new downside risk for Seoul’s trade-dependent economy.

By Bae Hyun-jung (