SEOUL (BLOOMBERG) - The Bank of Korea slashed its benchmark interest rate to a record low of 0.75 per cent in an emergency move following actions by the Federal Reserve and other central banks to combat economic damage from the coronavirus outbreak.
The BOK convened its first emergency board meeting since the global financial crisis on Monday and cut the seven-day repurchase rate by 50 basis points, effective March 17.
Concerns of a global recession have been rattling financial markets as the outbreak turns into a global pandemic, forcing consumers to stay home and sharply curtailing business activity. The Federal Reserve cut interest rates by a further full-percentage point on Sunday, which opened up room for central banks like the BOK to ease by mitigating concerns of a sharp capital outflow.
The global coronavirus spread has been smothering signs of green shoots across the South Korean economy that relies on exports for growth. Early data show retail sales and tourism have taken a hit in particular, while shrinking trade underscores wider supply chain disruptions.
The BOK has been facing criticism for failing to act on February, when it held rates and opted to raise the cap of inexpensive loans to businesses. The BOK cut its growth forecasts for this year to 2.1 per cent from 2.3 per cent then, a projection that now seems out of reach as economists like Goldman Sachs see only 1 per cent expansion.
South Korea's government is worried about long-lasting damage from the virus outbreak, and is seeking a swift parliament approval for the 11.7 trillion won ($9.5 billion) extra budget.
The BOK board is slated to convene April 9 for a regular meeting.