This photo taken on Nov. 24, 2022 shows the building of Bank of Korea BOK in Seoul, South Korea. South Korea’s central bank on Thursday raised its policy rate to curb inflation, delivering six back-to-back rate hikes for the first time. (Photo by Wang Yiliang/Xinhua via Getty Images)
Wang Yiliang | Xinhua News Agency | Getty Images
South Korea’s central bank cut its policy interest rate by 25 basis points Thursday as the country faces a double-whammy of protracted political turmoil and Trump’s sweeping tariffs.
The Bank of Korea reduced rates to 2.5% from 2.75%, its lowest level since August 2022, in line with expectations among economists polled by Reuters. That marked the central bank’s fourth cut in the current easing cycle.
The quarter-percentage rate cut came as the country continued to grapple with heightened political uncertainty following the botched attempt by former leader Yoon Suk Yeol to impose martial law in December.
South Korea was slapped with 25% reciprocal tariffs by the Trump administration, which were later suspended for 90 days. South Korean leaders are racing to strike a deal with the U.S. government before the July 8 deadline.
Both sides have stated that they aimed to agree on a package on tariffs and economic cooperation by then, but the South Korean minister for trade and industry said recently there was not enough time, and the upcoming election could delay it further.
South Koreans will head to the polls on June 3 to elect the next president. The snap election was called after Yeol was impeached as president and removed from office.
South Korea’s GDP growth unexpectedly contracted in the first quarter, shrinking 0.1% from a year earlier, according to advance estimates released last month. That marked its first contraction since the fourth quarter of 2020.
