Bank of Korea Governor Lee Juyeol, concurrently chairman of the Monetary Policy Board, on May 28 chairs a meeting at the bank’s headquarters in Seoul. (Bank of Korea)

By Lee Kyoung Mi and Lee Jihae

The Bank of Korea’s Monetary Policy Board on May 28 lowered the base interest rate by 25 basis points from 0.75% to 0.50% in a meeting on the direction of fiscal policy, the lowest level just two months after the rate fell to under 1% in March for the first time in its history.

The board said the rate cut was spurred by the significant contraction of the global economy due to lower economic activity caused by the novel coronavirus disease (COVID-19). It forecast the domestic economy to remain sluggish for some time amid declining exports and a sharp drop in the number of employed due to the pandemic.

The board projected GDP growth this year to fall to zero, considerably below the outlook made in February of 2.1%, and “very high” uncertainty over the future path of such growth.

The board pledged to “continue to conduct monetary policy in order to support the economy and stabilize consumer price inflation at the target level over a medium-term horizon.”

“As economic growth is expected to be sluggish and inflationary pressures on the demand-side are forecast to remain weak due to the COVID- 19 pandemic, the Board will maintain its accommodative monetary policy stance,” it said.

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