Bank of Korea Makes Surprise Interest Rate Cut, Warns Of Trade Risks

The Bank of Korea (BOK) has surprised markets by delivering its second consecutive interest rate cut, slashing the benchmark rate to 3% amid faltering economic growth and rising global trade uncertainties, Cynthia Kim and Jihoon Lee reported for Reuters.

The Bank of Korea's decision marks the first back-to-back rate cuts since 2009 as South Korea, Asia’s fourth-largest economy, grapples with external pressures. I Photo: Bank of Korea Linkedin

Only four out of 38 economists polled foresaw the move. The BOK board voted 5-2 in favor of the cut, and Governor Rhee Chang-yong hinted at further easing in the coming months, citing heightened risks to South Korea’s export-driven economy following Donald Trump’s re-election.

“Export competition is intensifying, and uncertainties about trade policies under Trump’s presidency remain significant,” Rhee said in a press briefing.

This marks the first back-to-back rate cuts since 2009 as South Korea, Asia’s fourth-largest economy, grapples with external pressures.

In particular, concerns are growing over the potential imposition of up to 60% tariffs on Chinese goods, which could indirectly affect South Korea.

South Korea posted a record $44.4 billion trade surplus with the US in 2023, making the nation vulnerable to Trump’s tariff policies. Safeguarding critical industries, including semiconductors, is now a priority for policymakers to sustain growth.