Korea Business News Agency - NSP NEWS.

(Seoul=NSP NEWS) = Bank of Korea’s Monetary Policy Committee has decided to cut the base rate by 0.25 percentage points—from 3.0% to 2.75%—bringing it into the 2% range for the first time in 2 years and 4 months since October 2020. Alongside this decision, the economic growth forecast has been revised to 1.5% for this year and 1.8% for next year. Consequently, the interest rate differential between Korea and the United States has widened from 1.5 percentage points to 1.75 percentage points.

On the 25th, the committee’s decision to lower the base rate was in line with market expectations. Financial experts noted several factors behind this move, including the stabilization of the won-dollar exchange rate from 1,470 won to around 1,420 won and a reduction in household debt to 90.5% of GDP.

In addition, the Bank of Korea updated its economic forecasts. After previously projecting a 1.9% growth rate last November and revising the January forecast to 1.6-1.7%, it has now adjusted its outlook to 1.5% for this year and 1.8% for next year.

The decision also comes amid concerns over U.S. President Donald Trump’s proposed tariffs on semiconductors, automobiles, and other products, as well as fears of a domestic downturn driven by high interest rates and high inflation. The consumer price inflation forecast has been revised to 1.9% for both this year and next year. With U.S. policy rates currently remaining between 4.25% and 4.40%, the interest rate gap has further widened from 1.5% to 1.75%.

By Geul-sam Kwon(gulsam2049@nspna.com) and Soo-in Kang(sink606@nspna.com)

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