South Korean central bank lowers interest rate to 4 per cent
South Korea's central bank Friday lowered its key interest rate for the third time in less than a month, saying the cut was made necessary by a persisting domestic economic slowdown, reported dpa.
The Bank of Korea's fiscal policy committee decided to cut the benchmark seven-day repo rate by 0.25 per cent to 4 per cent. The cut comes after a dramatic 75-basis-point cut in late October which followed a cut by 25 basis points earlier that month.
"The domestic economic slowdown persists," the bank said. "The pace of export growth has declined owing to the weakening of global economic growth and domestic demand such as private consumption remains sluggish."
The rate, which is important for lending between banks, is at its lowest level since February 2006. The central bank had lowered the rate twice in October. The latest cut follows a decision by the European Central Bank to cut interest rates in the eurozone from 3.75 per cent to 3.25 per cent.
The Bank of Korea indicated further cuts, if necessary. "We will do what is needed to ward off the risk of a severe slowdown in economic activity brought about mainly by the financial market unrest."
Earlier this week the South Korean government announced a stimulus package of 14 trillion won (10.6 billion dollars) to counter the slowdown.
Public spending will be increased by 11 trillion won. Finance Minister Kang Man Soo warned that the growth rate of Asia's fourth-largest economy could slump to 3 per cent in 2009. In July, the government downgraded its growth projections for the current year from 6 per cent to 4.5 to 5 per cent.