South Korean central bank cuts key interest rate

July 12th, 2012 - 2:00 pm ICT by IANS  

Seoul, July 12 (IANS) Bank of Korea (BOK), South Korea’s central bank, unexpectedly cut its benchmark interest rate to 3 percent Thursday, lowering the 7-day repo rate for the first time in 13 months.

The BOK’s decision was not in line with market consensus as most experts predicted the rate freeze due to conflicting factors such as deteriorating global economic outlook and high inflation expectations, reported Xinhua.

The unexpected rate cut came after central banks in Europe and China lowered their policy rates. The three-year Korean Treasury Bond (KTB) yields fell below the benchmark rate of 3.25 percent for the first time since the global financial crisis, reflecting growing speculation for the BOK’s monetary easing.

The European Central Bank (ECB) was widely expected to lower its policy rate last week due to bleak economic outlook caused by the region’s debt crisis, but the unexpected rate cut by the People’s Bank of China (PBOC) was perceived as a signal of how fragile the world’s No.2 economy became.

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