SEOUL - South Korea’s central bank delivered a surprise interest rate cut on Thursday, and shaved this year’s growth forecast to the lowest in a decade, as a brewing dispute with Japan piled more pressure on the trade-dependent economy.
Bank of Korea Governor Lee Ju-yeol told a news conference the central bank has room to respond to any changes in economic conditions, which analysts took as indicating another policy easing was on the table. Treasury bond futures jumped on expectations for another rate cut, although stock and currency traders shrugged off Thursday’s rate decision.
“Our economic assessment reflected Japan’s imposition of export restrictions as they will have considerable effects on our economy,” he added, referring to Japan’s curbs on exports to South Korea of key materials for chip and display production. The BOK has come under more pressure to cut rates after first-quarter GDP and inflation fell short of expectations and the U.S.-China tariff dispute remains unresolved.