Bank of Korea reduces interest rates after maintaining them for nearly two years.

• The Bank of Korea (BOK) has decreased its key interest rate by 0.25% to 3.25%, marking the first rate reduction from the BOK since the Federal Reserve began tightening its monetary policy in March 2022.
• Reuters polled economists and they forecast that the BOK would deliver a rate cut.

The Bank of Korea (BOK) has decreased its key interest rate by 0.25% to 3.25%, marking the first rate reduction from the BOK since the Federal Reserve began tightening its monetary policy in March 2022.

According to a Reuters poll of economists, a rate cut was forecasted.

After South Korea's inflation rate reached its lowest point in three years, the Bank of Korea (BOK) announced a move to keep inflation under control.

In January 2023, the BOK increased its rates by 300 basis points, reaching a 15-year high of 3.5%.

In July 2022, South Korea's inflation rate increased from 2.6% to 6.3%, marking its highest level in over 20 years.

Morgan Stanley's chief Korea economist Kathleen Oh characterized the action as "long-awaited" in an Oct. 4 report, noting that it has been 22 months since the last rate move in January 2023.

The report states that muted inflationary pressure has persisted since July, and the upside risks to inflation have diminished due to stronger USDKRW and global oil prices.

The main factor preventing a cut at the BOK's monetary policy meeting was housing demand, but this demand has now faded, allowing BOK members to be more dovish.

The BOK is expected to make three more consecutive interest rate cuts, starting in October, with the final cut bringing the benchmark rate to 2.5%.

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