-- The Bank of Korea cut its benchmark interest rate after local property markets showed signs of cooling and inflationary pressure eased sharply, allowing authorities to finally shift their focus to supporting economic activity.Should Evictions Be Banned After Hurricanes and Climate Disasters?
“The rate cut not only responds to the consumption that’s been lackluster, but also shows the BOK can afford to loosen a bit given the pressure pushing the inflation rate back above 2% appears limited,” said Ahn Yea-ha, analyst at Kiwoom Securities Co. Ahn still forecasts a gradual easing with the BOK holding the rate in November.
“Monetary easing on a measured pace could also help engineer a soft landing of property markets in a close coordination with financial regulators,” Goldman Sachs analysts Goohoon Kwon and Andrew Tilton said in a note. With moderating export growth and other potential headwinds to the economy, the BOK will likely conduct a quarter-point cut each quarter until the rate reaches 2.5% by the third quarter of next year, they projected.
South Korea’s gross domestic product shrank unexpectedly in the second quarter after a stronger-than-expected expansion at the start of 2024. Declines in investment weighed on economic activity with elevated borrowing costs and uncertain consumption outlooks hurting sentiment. Still, policymakers have downplayed the slip in growth largely as temporary.
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