South Korea cuts interest rate for first time since October

SEOUL (AFP) - South Korea unexpectedly trimmed its benchmark interest rate by 0.25 percentage points on Thursday - the first cut for seven months aimed at boosting an economy hit by slumping exports.

The move announced by the central Bank of Korea (BOK) leaves the key policy rate at 2.50 per cent, following two similar cuts last year in July and October.

South Korea's export-reliant economy - the fourth largest in Asia - has been badly hit by shrinking global demand, with overseas shipments falling 1.3 per cent last year.

The overall economy expanded just 2.0 per cent in 2012 - the slowest growth in three years.

In April, the central bank lowered its 2013 growth forecast to 2.6 per cent, just three months after slashing it from 3.2 per cent to 2.8 per cent.

With inflation under control, the BOK had come under pressure to cut rates in coordination with recent government stimulus measures.

The rate announcement came a day after parliament approved a supplementary government budget of 17.3 trillion won (S$19.5 billion), aimed at creating jobs and supporting smaller businesses.