BOK cuts key rate to 1.25% as gov't pushes with corporate restructuring
- 8 years ago
The Bank of Korea put an end to almost a year of holding rates.
This decision comes as part of the bank's efforts to boost the economy,.... in the face of the government's corporate restructuring drive,
Hwang Ji-hye fills us in on the surprise rate cut.
It was a bolt out of the blue that few were expecting.
The Bank of Korea on Thursday cut its key rate by a quarter-of-a-percentage point to an unprecedented low of 1-point-2-5 percent.
The unanimous decision came as the economy has seen its traditional growth engine, exports, fall sharply for almost a year-and-a-half.
"We believe there are considerable downside risks in the second half of this year. The slowdown in global trade is greater than we had forecast in April and downward pressure could mount as the government's corporate restructuring gains momentum."
But the top central banker brushed aside speculation that the rate trim is aimed at facilitating the process of corporate restructuring, adding that it was a preemptive move to tackle the low growth trend.
And experts say it would have been now or never... for Korea's central bank to cut the rate... as the worse-than-expected U.S. jobs data in May tempered forecasts of a rate hike by the Federal Reserve in June, in return giving leeway for the BOK.
Maneuvering the rate against the Fed's interest rate plans has prompted fears of massive capital outflows in emerging markets, and Korea is no exception.
"It's a matter of when, but considering the Fed will likely raise its interest rates in the second half of the year, June may have been the appropriate month for Korea's monetary policymakers to go with a rate cut decision."
The governor emphasized though a rate cut itself will not put the economy back on track to a solid recovery and that fiscal policy as well as structural reforms should also follow.
Concern over further exacerbating household debt is another thorny issue that the central bank will have to confront.
"Despite the potential negative
This decision comes as part of the bank's efforts to boost the economy,.... in the face of the government's corporate restructuring drive,
Hwang Ji-hye fills us in on the surprise rate cut.
It was a bolt out of the blue that few were expecting.
The Bank of Korea on Thursday cut its key rate by a quarter-of-a-percentage point to an unprecedented low of 1-point-2-5 percent.
The unanimous decision came as the economy has seen its traditional growth engine, exports, fall sharply for almost a year-and-a-half.
"We believe there are considerable downside risks in the second half of this year. The slowdown in global trade is greater than we had forecast in April and downward pressure could mount as the government's corporate restructuring gains momentum."
But the top central banker brushed aside speculation that the rate trim is aimed at facilitating the process of corporate restructuring, adding that it was a preemptive move to tackle the low growth trend.
And experts say it would have been now or never... for Korea's central bank to cut the rate... as the worse-than-expected U.S. jobs data in May tempered forecasts of a rate hike by the Federal Reserve in June, in return giving leeway for the BOK.
Maneuvering the rate against the Fed's interest rate plans has prompted fears of massive capital outflows in emerging markets, and Korea is no exception.
"It's a matter of when, but considering the Fed will likely raise its interest rates in the second half of the year, June may have been the appropriate month for Korea's monetary policymakers to go with a rate cut decision."
The governor emphasized though a rate cut itself will not put the economy back on track to a solid recovery and that fiscal policy as well as structural reforms should also follow.
Concern over further exacerbating household debt is another thorny issue that the central bank will have to confront.
"Despite the potential negative