Bank of Korea cuts rate to cushion economy from tariffs, political turmoil

The Bank of Korea delivered a widely expected interest rate cut Thursday to help buffer the export-driven economy from Donald Trump’s sweeping trade tariffs and revive domestic activity after months of political turmoil eroded growth.The central bank lowered its seven-day repurchase rate by a quarter percentage point to 2.5% on Thursday. The rate cut, the fourth since the BOK began its easing cycle in October, was forecast by all 21 polled economists.

The bank had long appeared ready to lower borrowing costs after the economy slipped into reverse in the first quarter, with most recent indicators showing little sign of a rebound.

While the nation’s presidential election is just five days away, Governor Rhee Chang-yong said in April that the decision in May had to stay neutral of politics and focus on the economy’s needs. At the time, all six board members were open to a rate cut within three months in what appeared to be a clear signal that action was coming this month.In addition to weak exports, subdued investment and faltering consumption pointing to an economy in need of support, the recent appreciation of the Korean won likely gave the central bank additional scope to resume monetary easing without stoking inflation. The currency recently climbed to a seven-month high against the dollar after months of volatility previously restrained the BOK’s options.

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