South Korea Slashes Interest Rates Amid Economic Revival Push

The Bank of Korea has reduced its key interest rate for the first time in over four years, aiming to stimulate economic growth amid lingering debt and inflation worries. Inflation is showing signs of stabilizing, and a cautious approach will be taken for further rate cuts due to ongoing uncertainties.

In a strategic move to boost the flagging economy, South Korea's central bank has slashed its policy rate for the first time since May 2020. The Bank of Korea's decision to lower the interest rate by a quarter percentage point to 3.25% highlights the priority of reviving sluggish economic growth over household debt concerns.

The rate cut comes in response to stabilizing inflation and a deceleration of household debt growth as the housing market slows in the greater Seoul area. Central bank Governor Rhee Chang-yong expressed a careful stance on further cuts, emphasizing economic capacity and market stability.

South Korea's economic future is fraught with uncertainties, including the volatile Middle East situation affecting fuel prices and exchange rates. The bank projects a 2.4% growth rate this year, slightly down from 2023, noting gradual improvements in exports but continuing job growth challenges.

(With inputs from agencies.)