SEOUL : South Korea’s monetary policy board said the economy needs more policy interest rate cuts in the coming weeks to address the hit to growth from U.S. tariffs, minutes from the bank’s meeting showed, although household debt growth remains a concern.
The Bank of Korea’s monetary policy board voted at its August 28 meeting by 6-1 to keep its benchmark interest rate unchanged at 2.50 per cent, in line with expectations.
“As the impact of tariff policies becomes more apparent towards the end of the year, growth is expected to gradually slow down,” said board member Shin Sung-hwan, who had voted for a 25 basis point cut, according to the minutes.
South Korea is currently weighing up painful trade concessions in a bid to finalise a U.S. trade deal that aims to cap tariffs on U.S. imports from South Korea at 15 per cent. The talks have stalled for the time being as details around a $350 billion investment fund have not been hammered out yet.
While Shin was the sole dissenter on the seven-member board at the meeting, most other members also said a rate cut should be necessary in coming months to “aid growth that is seen hovering significantly below (the economy’s) potential growth rate,” another member said.
Only dissenting members are identified in the minutes of the bank’s monetary policy board meetings.
The bank also revised up its economic growth forecast for this year to 0.9 per cent from 0.8 per cent previously, which would still mark the slowest expansion since 2020.
