November 28, 2024

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Bank of Korea Gov. Rhee Chang-yong bangs a gavel during a monetary policy board meeting held at the central bank's headquarters in Seoul, Thursday. (Joint Press Corps-Yonhap)

The Bank of Korea cut its base rate by 0.25 percentage points amid heightened uncertainties following Donald Trump's victory in the US Presidential Election.

On Thursday, the Monetary Policy Board members at the central bank delivered a surprise rate cut, bringing down the benchmark interest rate to 3 percent.

It was the second consecutive time the BOK cut the rate, having delivered a 25 basis point rate cut in October as well. The rate cut was the first in over three years since the central bank started to hike the rate in August 2021.

The decision to cut the rate brought the Korea-US rate gap up to 1.75 percent. While the US Federal Reserve has delivered two consecutive rate cuts this year, Trump’s return has fueled inflation fears. Market watchers have suggested that the US central bank may stop its rate cut cycle and bring aggressive monetary policy back on the table.

The market had expected the BOK to freeze the rate due to concerns about the depreciation of the local currency.

The Korean won has lost its value against the US dollar following Donald Trump's victory in the US Presidential Election, weakening to the 1,400 won range. The local currency started trading against the US dollar at 1,391 won on Thursday, nearly 20 won weaker than earlier this month, then it traded at 1,370 won.

With the BOK wrapping up its monetary policy meeting for this year, the market now awaits the US Fed’s next decision, set for Dec. 17-18.

By Im Eun-byel (silverstar@heraldcorp.com)