Bank of Korea to Cut Rates by 25% Points, Citing Trade Tensions and Election

The Bank of Korea is anticipated to reduce its benchmark interest rate by 25 basis points this week, marking the second rate cut of the year. This decision comes as the central bank aims to strengthen the economy, which has been facing challenges due to external factors such as trade tensions and slowing global growth. Economists surveyed predict that the interest rate will be lowered from 2.75% to 2.5%. The central bank's governor, Lee Chang-yong, had previously indicated in April that all six members of the policy board were open to the idea of lowering interest rates within the next three months.

The decision to cut rates is also influenced by the upcoming presidential election, as the central bank seeks to provide additional support to the economy ahead of the political event. The move is seen as a proactive measure to mitigate the risks posed by trade policies, particularly those implemented by the United States, which have had a significant impact on the region's economic outlook.

In addition to the rate cut, the Bank of Korea is also expected to revise its economic growth forecast for the year. The downward adjustment reflects the current economic conditions and the challenges faced by the region's economy. The central bank's actions are aimed at stimulating economic activity and providing a more favorable environment for businesses and consumers. The rate cut is expected to lower borrowing costs, encourage lending, and boost consumer spending, all of which are crucial for economic recovery.

The central bank's decision to lower interest rates and adjust its economic growth forecast underscores the challenges faced by the region's economy. The move is part of a broader effort to support economic stability and growth in the face of external uncertainties. The central bank's actions are closely watched by markets and economists, who will be looking for further indications of the region's economic trajectory in the coming months.

Two leading presidential candidates have also pledged additional spending measures to boost the economy if elected. The Democratic Party candidate, Lee Jae-myung, has promised an emergency stimulus package worth at least 30 trillion won (approximately 21.8 billion). His conservative rival, Yoon Suk-yeol, has indicated that he would discuss a supplementary budget of a similar scale, aimed at public welfare.