Overview

• The Bank of Korea reduced its benchmark rate by 25 basis points on May 29, marking the fourth cut since October 2024 and a cumulative easing of one percentage point.
• The central bank trimmed its 2025 GDP growth forecast from 1.5 percent to 0.8 percent after the economy contracted 0.2 percent in the first quarter as consumption stagnated and exports fell.
• Four of six Monetary Policy Board members signalled openness to further rate cuts over the next three months in response to persisting uncertainty over global trade and domestic politics.
• The rate decision widened South Korea’s interest rate gap with the United States to two percentage points, raising concerns about currency stability and potential capital outflows.
• Officials warned that additional easing could fuel household debt growth and real estate volatility, highlighting the need for coordinated fiscal measures by the incoming administration.