BOK cuts rates to 0.50%, sees biggest GDP contraction since Asian financial crisis, KRW off lows
|
As widely expected, the Bank of Korea (BOK) cut the key interest rate by 0.25bps to the lowest since the South Korean central bank adopts the current policy system at 0.50%.
The decision comes, as the BOK board predicts the economy to contract this year, in the face of the coronavirus pandemic led economic shock. The central bank has already announced unlimited bond-buying in its previous meeting to stimulate the economy.
Key details
“The bank downgraded its 2020 economic projection to a 0.2% decline, from its February forecast for 2.1% growth.
“The contraction would be the biggest since the 1998 Asian financial crisis. “
“The BOK also sees inflation for this year at 0.3%, down from 1.0% seen earlier.”
On the fiscal front, the government is considering announcing for a third supplementary budget as April exports suffered the worst slump in 11 years.
Market reaction
On the policy announcement, the USD/KRW saw some volatile moves but remained within the familiar trade range. The spot hit a daily high of 1,239.28 on the decision before turning negative near 1,237.50, where it now wavers.
The Korean won (KRW) regained ground on hopes that the stimulus measures by the central bank will help revive the economic growth sooner-than-expected.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.