Limatura of 25 points base to 2.5%, GDP almost halved at 0.8%
The South Korean central bank (BOK) cuts the reference rates of 0.25%, to 2.5%, just five days from the presidential elections of 3 June, in the efforts to relaunch a stagnant economic growth struggling with weak consumption and uncertainties related to the US dice of President Donald Trump. At the same time, Bok also halves its GDP estimates for 2025 at 0.8%, against 1.5% of February, to emphasize the worsening of the situation.
The cutting on rates is the fourth intervention (all from 25 basic points) since October 2024, when the central bank decided for its first monetary loosening since August 2021. “Despite the concerns about the growth of the debt of families and on the increase in the volatility of the currency markets, the economic growth rate will be expected to decrease considerably”, reported the note of the BOK. Therefore, the cutting of the rates was “deemed appropriate” to mitigate “the downward pressure on the economy”. The timing and the rhythm of any further rates of the rates will be adequate “based on the tariff negotiations in progress between the United States and the main economies, the changes in the monetary policies of the main economies and the evolution of geopolitical risks”.
As for the projections on the 2025 GDP, the rectified data is below the estimated potential growth rate, equal to 2%, which hypothesizes the maximum rhythm to which the economy can expand without triggering the dangerous risks of inflation.
