(MENAFN- Kuwait News Agency (KUNA) South Korea's central bank unexpectedly slashed the base rate to a record low of 1.75 percent Thursday amid sluggish growth, Yonhap News Agency reported.
The rate cut is the first since October, when the Bank of Korea (BOK) brought down the key rate to a then-record-matching low of 2 percent.
"A quarter percentage point rate cut was deemed desirable as growth is expected to fall below forecasts and inflation is also expected to fall. We considered how there is a need to further boost economic recovery momentum even after last year's two rate cuts," BOK Gov. Lee Ju-yeol was quoted as telling reporters in a press conference in Seoul.
A statement by the policy board also showed its perception of the economy soured starting in February when it left the base rate unchanged.
The monetary policy committee noted "sluggish movements" in domestic demand and said the negative output gap will remain "longer than anticipated." The rate cut comes as a surprise to the market, which had been betting that the BOK would extend its wait-and-see mode for the fifth straight month and likely take action in April when it releases the latest economic updates. Taking a cue from the European Central Bank's aggressive quantitative easing, nearly 20 countries, including China, India and Australia, have lowered their policy rates this year. Consumer prices in South Korea edged up 0.5 percent on-year in February, growing less than 1 percent for the third month in a row and marking the slowest growth since July 1999. Outbound shipments slumped 3.4 percent on-year last month, boding poorly for the heavily trade-reliant economy.
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