South Korea cuts interest rate

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BankofKorea A man gets on a bicycle in front of the Bank of Korea in Seoul.

Seoul - South Korea's central bank cut interest rates for the first time in 15 months Thursday, under growing government pressure including warnings of recession from the new finance minister.

The Bank of Korea (BOK) cut its benchmark rate by 25 basis points to 2.25 percent.

It was the first rate cut since May 2013.

The move came after the finance ministry last month unveiled a $40 billion (R423 billion) stimulus package and revised its 2014 economic growth forecast down from 4.1 percent to 3.7.

At the time, Finance Minister Choi Kyung-Hwan warned that the national economy stood at a crossroads between “making a leap forward and falling into a recession”.

The central bank has autonomy over monetary policy, but is known to have succumbed to government pressure in the past.

According to the BOK, the economy posted its slowest growth in more than a year in the second quarter, partly due to sluggish consumer spending following the Sewol ferry tragedy.

Gross domestic product rose a seasonally adjusted 0.6 percent in the April-June period from the previous quarter.

It was the slowest growth since the first quarter of 2013 and missed market expectations of around 0.7 percent.

Year-on-year, Asia's fourth largest economy expanded 3.6 percent, down from the previous quarter's 3.9 percent. - Sapa-AFP



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