In a surprising move, South Korea's central bank has cut its benchmark rate after its July policy meeting today, citing external factors including Japans' recent export restrictions against South Korea.
For more, we have our Kim Da-mi on the line for us at the Bank of Korea.
Dami, what can you tell us?
The Bank of Korea slashed its policy rate by 25 basis points to 1.five percent to help spur growth amid prolonged trade tensions.
This is the first rate cut since last November when the central bank raised the rate by 25 basis points to one.75 percent.
In fact, the last rate cut was 3 years ago back in 2016, when the rate was at a record-low of 1.25 percent amid slow economic growth.
The BOK pointed to growing external uncertainties, including the U.S.-China trade dispute, as well as Japan's latest export restrictions on South Korea.
The unexpected rate cut also comes after seven consecutive months of decline in the country's exports.
Exports, a key driver of South Korea's economic growth, could face further headwinds due to Japan's latest export curbs on key materials for the production of semiconductors and display panels.
The BOK also pegged the country's GDP growth rate to 2 percent this year, lower than its April forecast of 2.5 percent, due to the fall in outbound shipments and investment.
The BOK governor also said Japan's export curbs did influence the central bank's decision and added if Japan dials up economic pressure, it could have a measurable impact on Korea's economic growth.
Bank of Korea Governor Lee Ju-yeol had earlier hinted at a possible rate cut, but the timing of it came as a surprise to many market observers, right?
Yes. Many analysts had expected the move to happen in August, with the U.S. Federal Reserves expected to lower its own key rate at the end of this month.
However, the central bank's latest decision sends out a strong message, that an expansionary monetary policy is needed to boost the country's economic growth.
The Bank of Korea said it will maintain its accommodative policy stance to support the domestic economy and carefully monitor the U.S.-China trade war, as well as Japan's latest export curbs.
That's all from me, Ji-yoon.