South Korea’s central bank cut its key interest rate yesterday for the fifth time in just three months to help shore up the country’s sagging economy.
The Bank of Korea lowered the benchmark seven-day repurchase rate to a new record low of 2.5 percent from 3 percent at a regular policy meeting yesterday.
“Domestic economic activity is slackening at a rapid pace,” the bank’s monetary policy committee said in a statement. “The downside risk to economic growth is considered to have been heightened by the persistent financial market unrest including the credit crunch.”
The central bank has joined others worldwide in slashing rates to battle the global financial crisis. The Bank of England on Thursday cut rates to 1.5 percent — the lowest level in its 315-year history.
South Korea’s export-driven economy has been hit hard by declines in global consumer demand. Factory output plunged 14.1 percent in November from the same month the year before, government data show.
Exports fell 17.4 percent last month, following a drop of 18.3 percent in November.
The Bank of Korea said last month that the economy will probably manage growth of just 2 percent this year from an estimated 3.7 percent last year. South Korea, Asia’s fourth-largest economy, grew 5 percent in 2007.
Some economists, however, say South Korea could this year suffer its first contraction on an annual basis since 1997, when it was in the throes of the Asian economic crisis.
Yesterday’s cut marked the fifth time the Bank of Korea has slashed the key rate since Oct. 9. A full percentage point reduction last month was its biggest ever.
South Korea’s benchmark stock index fell 2.1 percent yesterday to close at 1,180.96. The won fell 0.7 percent against the US dollar to finish at 1,343.
South Korea’s rate still remains above those of some major central banks. The US Federal Reserve’s key rate is at a record low, in a range of zero to 0.25 percent. The Bank of Japan’s benchmark rate is at 0.1 percent.