The Bank of Korea (BOK) has reduced its benchmark interest rate to 1.25%, the lowest level since August 2022, to combat an economic slowdown. The decision, announced on February 25, 2025, aims to stimulate growth and boost inflation, which has remained below the bank’s 2% target.
BOK Governor Lee Ju-yeol stated that the rate cut is necessary to support the economy and ensure stability. “We are taking decisive action to address current challenges,” Lee said.
The rate cut has been welcomed by businesses and consumers but has raised concerns about rising household debt and potential asset bubbles. Analysts warn that further rate cuts could exacerbate these risks.
The South Korean won weakened slightly against the U.S. dollar following the announcement, while the stock market saw a modest rally.
