BOK cuts rates to 0.50%, sees biggest GDP contraction since Asian financial crisis, KRW off lows

Dhwani Mehta FXStreet

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.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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