South Korea’s central bank announced a rate cut to a record low on Monday to combat the economic fallout of the coronavirus outbreak, hours after the US Federal Reserve slashed rates.
The Bank of Korea (BOK) cut its key rate by 50 basis points to 0.75 per cent, joining other central banks unveiling emergency measures to fight the outbreak, which observers say threatens to cause a global recession.
South Korea, the world’s 12th-largest economy, had kept its key rate at 1.25 per cent since October.
“To ease the volatility of the financial markets,” the bank said in a statement, it was “necessary to reduce the ripple effect on growth and inflation by expanding the degree of easing on monetary policies”.
The announcement came after President Moon Jae-in called for “unprecedented measures” to help the country cope with the outbreak, describing it as “an emergency economic situation”.
To curb speculative trading, Seoul’s financial regulator last week announced a six-month ban on short-selling of shares.
The Fed attempted to stem the panic with drastic measures announced before Asian markets opened on Monday, slashing its key interest rate to virtually zero in its second emergency rate cut in less than two weeks.
Prior to the outbreak, Moon’s administration had initially been set to raise public spending 9.1 per cent this year and spend 30 per cent of its infrastructure budget in the first quarter, ahead of parliamentary elections scheduled for April.