Anchor: The Bank of Korea on Thursday slashed its key interest rate for the first time in about three years. As the central bank moved to cope with hostile conditions at home and abroad, it also marked down the growth forecast for this year by point-three percentage point.
Our Kim Bum-soo has more.
Report: The South Korean central bank has slashed its key rate by a quarter of a percentage point to one-point-five percent.
[Sound bite: Bank of Korea Governor Lee Ju-yeol (Korean)]
"Today, the Monetary Policy Board decided to lower the Bank of Korea base rate from the current one-point-75 percent to one-point-five percent. I will explain the reasons."
Announcing the first rate cut in over three years on Thursday, Bank of Korea Governor Lee Ju-yeol cited tough economic conditions both at home and abroad.
[Sound bite: Bank of Korea Governor Lee Ju-yeol (Korean)]
"Looking at external economic conditions following the rate setting meeting in May, global economic growth has continued to be sluggish. Real economic growth has slowed at home. [Domestic] consumption has maintained a gradual rising trend but facility and construction investments have been in an adjustment phase while growth in trade slowed alongside sluggish semiconductor exports."
The central bank had kept the borrowing cost steady at one-point-75 percent for eight months. The surprise rate decision came a month earlier than market expectations as the bank marked down its growth forecast from two-point-five to two-point-two percent.
[Sound bite: Bank of Korea Governor Lee Ju-yeol (Korean)]
"We lowered this year's growth forecast by point-three percentage point from the April figure. We took into account worse-than-expected exports and investments in the first half and that conditions remain pessimistic down the road... We also newly estimated the economy's growth potential in consideration of recent structural changes. The growth potential came to two-point-five to two-point-six percent for 2019 and 2020."
Lee warned reporters that if the current trade dispute with Japan worsens, the impact on the Korean economy could be significant.
With the U.S. Federal Reserve expected to lower its rate later this month from the current two-point-25 to two-point-five percent range, the BOK chief hinted that an additional rate cut is possible later in the year, presumably to prevent capital outflow.
Kim Bum-soo, KBS World Radio News.