BY CYNTHIA KIM AND JIHOON LEE
SEOUL—South Korea’s central bank cut interest rates for a fourth time in its current easing cycle on Thursday to support an economic recovery clouded by US tariffs, just days ahead of a presidential election in Asia’s fourth-largest economy.
The Bank of Korea lowered its benchmark interest rate to 2.50 percent, as expected, and almost halved this year’s economic outlook to 0.8 percent on Thursday.
That suggests more scope for further easing just as presidential candidates from both major political parties promise bigger fiscal stimulus packages to counter a slowdown.
“We of course have downside risks from (US) tariff policy depending on how that goes, which raises the likelihood of further exports deterioration,” Governor Rhee Chang-yong said in a news conference.
While Rhee acknowledged the possibility that the trade outlook may improve, pointing to a US court’s decision to block Donald Trump’s tariffs on Wednesday, the BOK remained primed for more support for the economy.
Four of the BOK’s seven board members said the door for further rate cuts should remain open for the next three months, Rhee said.
The broadly dovish outlook pushed June futures on three-year treasury bonds higher.
Having taken a relatively shorter period of time to rein in inflation, South Korea’s monetary policy is set to be more accommodative by the end of this year than those of the US or Australia and broadly on a par with Canada’s and New Zealand’s.
Analysts see two more rate cuts by the end of this year to 2.00 percent in South Korea.
