SEOUL, KOREA - The Bank of Korea has lowered the benchmark interest rate to 2.50 percent. The central bank's Monetary Policy Committee held a regular meeting on May 9 and decided to cut its base money rate by 25 basis points to 2.50 percent. For the past one year, the benchmark rate has been reduced three times in July and October last year and May this year.

 

It is widely believed that the Monetary Policy Committee cut the rate because it sees the domestic economy's recovery pace is losing steam. The fact that central banks in other major economies including those of the United States, Japan, the EU, and Australia are leaning toward monetary easing also influenced the Bank of Korea's decision.

 

Recently, central banks of India and Australia decided to cut their benchmark rates by 0.25 percentage point, following the lead of the European Central Bank.

 

Lee Jeong-beom, analyst with Korea Investment Holdings, said, "It it hard to tell whether consumer prices would rise or the recovery pace would be stepped up in the latter half of this year. In a situation where most major economies are turning toward monetary easing, it is the appropriate time for Korea to do the same."

 

Choi Dong-cheol, analyst with Woori Investment & Securities, said, "The central bank's rate cut is more meaningful in that it shows the Bank of Korea is working closely with the government's policy makers to stimulate the economy. This is the right time for a policy mix between monetary and fiscal policy to be called for."