South Korea cuts rates as election turmoil escalates

Mace | 29th May 2025 | International

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The Bank of Korea has reduced its key interest rate to 2.5% amid slowing growth and global trade pressures. The move comes days before a contentious presidential election, dominated by personal attacks and scandal. Economic uncertainty is deepening as policy discussions are drowned out by political infighting and voter fragmentation.

On 29 May 2025, the Bank of Korea (BOK) reduced its benchmark interest rate by 25 basis points to 2.5%, marking the fourth cut since October 2024. This decision aligns with expectations from all 36 economists surveyed by Reuters, aiming to address increasing downside risks to economic growth and inflation, partly due to United States measures affecting global trade. Alongside the rate cut, the BOK sharply downgraded its 2025 economic growth forecast to 0.8%, nearly halving its earlier estimate of 1.5%. The central bank cited weak domestic demand and external pressures, including U.S. trade tariffs imposed under President Donald Trump. Despite recent easing of global trade tensions, uncertainties surrounding U.S.-China relations and geopolitical risks continue to affect markets. The domestic economy remains frail, with ongoing weakness in consumer spending, business investment, and slow job creation. The BOK's decision comes just days before South Korea's presidential election, schedule...

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