BY RAHUL TRIVEDI
BENGALURU — The Bank of Korea (BOK) will lower its key policy rate by 25 basis points on Thursday as economic activity contracted in the last quarter and benign inflation supports the case for easing, a Reuters poll of economists found.
BOK Governor Rhee Chang-yong signalled the possibility of a rate cut at the April meeting, days before official data showed South Korea’s economy contracted 0.2 percent in the first quarter from the previous three months.
With inflation at 2.1 percent in April – close to the BOK’s 2.0 percent target – and the Korean won rebounding around 9 percent from last month’s low, the central bank has more space to resume its easing cycle.
All 36 economists polled between May 19-25 expected the BOK to cut its base rate by 25 basis points to 2.50 percent on May 29, a level last seen in August 2022.
“At the April meeting, policymakers strongly suggested that there would be a rate cut and the near-term growth forecasts could be revised downwards,” said Suktae Oh, chief Korea economist at Societe Generale.
“Since then, we have not seen anything in the data that would be likely to deter them. Indeed, the Q1 GDP contraction, continued uncertainty on US tariffs and the decline in the USD/KRW exchange rate further support monetary easing.”
Among those who provided a longer-term outlook on rates, a strong majority of economists, 23 of 27, expected the key interest rate to fall by 50 basis points from current level to 2.25 percent by the end of next quarter, a view broadly unchanged from the previous poll.
