Bank of Korea Cuts Rate, Joining Global Wave of Policy Easing

By Kwanwoo Jun

South Korea's central bank cut its key interest rate for the first time in more than four years, joining a growing group of global peers in easing monetary policy as it looks to support the economy.

The Bank of Korea lowered its benchmark seven-day repurchase rate by a quarter-percentage point to 3.25% from a 15-year high of 3.50% on Friday, ending its longest-ever run of keeping rates on hold. The central bank's previous rate cut was in May 2020, and it had stood pat at the 13 consecutive rate-setting meetings held since February 2023.

Twenty out of the 28 analysts polled by The Wall Street Journal ahead of Friday's decision had forecast a rate cut in October, while the remainder had thought that the policy pivot could be delayed until November.

Cooling inflation, weakening economic growth and the government's efforts to curb mortgage-fueled household debt back the case for a BOK cut. The fact that central banks in the U.S., Europe, New Zealand and some other Asian countries had already kicked off their easing cycles also put pressure on the BOK to loosen policy settings.

Analysts expect that the BOK might opt for a gradual pace of policy easing, bringing the rate down to between 2.50% and 2.75% by the end of 2025.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com