Markets were unimpressed. Bond traders had prepared for this, and the benchmark Kospi Index abruptly declined, falling 0.5% immediately after the rate decision. Kicking off a new easing cycle will not lift South Korea out of its slump.
SINGAPORE (July 22): Asia’s most stubborn central bank just reversed course. With the US Federal Reserve all but certain to renew its easing cycle at the end of the month, the Bank of Korea (BOK) preemptively cut its benchmark interest rate to 1.5% from 1.75%, in a decision that surprised roughly half of the economists polled by Bloomberg.
The central bank aimed to calm markets: Once an Asian Tiger, South Korea is now in the doghouse. The Korean won has tumbled 5.4% this year, while its stock market is the region’s second worst-performing after Pakistan, on a dollar basis.
