SKorea cuts key interest rate, warns of slowing growth
AFP - 2 hours 40 minutes ago
SEOUL (AFP) - - South Korea's central bank cut its key interest rate Friday for the third time in a month, saying the economy is slowing down sooner than expected amid global financial turmoil.
The Bank of Korea reduced the benchmark seven-day repo rate for November by a quarter of a percentage point to 4.0 percent, with one analyst suggesting further cuts could be made soon.
On October 27 the bank had announced its largest-ever interest rate cut of 75 basis points, following a 25 basis points reduction on October 9.
South Korea is trying hard to stimulate sluggish domestic demand because of a likely slowdown in its crucial export sector amid international economic gloom.
On Monday the government announced a 10.7 billion dollar stimulus plan.
"The growth of the Korean economy is expected to sharply cool as financial market jitters are affecting the real economy," the central bank said in a statement.
Its chief Lee Seong-Tae said growth has been slowing faster than expected.
"Since the export outlook is expected to be bad along with domestic demand, so economic growth could show a considerable slowdown (at least) until the first half of next year," he told a press conference.
The economy grew 0.6 percent quarter-on-quarter in July to September, the slowest growth in four years.
Households and smaller firms struggling with mounting debt have increasingly been cutting spending.
A currency swap agreement reached with the United States Federal Reserve last week has eased downward pressure on the won and given the central bank more scope for interest rate cuts.
The won has lost around a third of its value against the dollar this year and is Asia's worst-performing major currency. But it has lately been supported by the swap deal.
"The central bank may reduce the rate to 3.25 percent until the first half of 2009, given cooling economic growth," said Lee Sung-Kwon, an economist at Goodmorning Shinhan Securities.
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