S. Korea cuts its key interest rate, lowers its growth forecasts
By Youkyung Lee, AP
October 12, 2012, 1:52 pm TWN
SEOUL -- South Korea's central bank cut its key interest rate Thursday for the second time this year and slashed growth forecasts as Asia's fourth-largest economy faces mounting threats from the protracted debt crisis in Europe and a worsening global slowdown.
The Bank of Korea's seven-member policy board lowered the benchmark seven-day repurchase rate by a quarter of a percentage point to 2.75 percent. The bank cut its growth forecast for this year to 2.4 percent from 3 percent. It lowered its forecast for next year to 3.2 percent from 3.8 percent.
“We expect this rate cut to help South Korea's economy recover growth,” Bank of Korea Governor Kim Choong-soo said at a briefing.
“External conditions worsened more than we expected. Because slumping growth in South Korea's economy stems from the worsening external conditions rather than internal problems, we need to respond to that.”
The central bank lowered borrowing costs for the second time this year after holding the rate steady in the previous two months. The last rate reduction to 3 percent from 3.25 percent was in July and was the first rate cut in more than three years.
A rate cut this month was widely expected among analysts as the latest economic data showed growth in South Korea's economy was losing steam amid weakening overseas demand for the country's exports. Exports account for about half of South Korea's economy.