South Korea's central bank unexpectedly lowered its key interest rate on Thursday, urgently attempting to guard Asia's fourth-largest economy against Europe's persistent debt woes and slowing growth in China, according to AP. The Bank of Korea said its policymakers cut the benchmark seven-day repurchase rate by a quarter of a percentage point to 3 percent. The decision mirrors similar moves by policymakers in Europe and China to stave off a recession but surprised most market watchers, who had forecast a rate freeze for a 13th straight month. The rate cut decision among seven policymakers was not unanimous. "We expect the rate cut will help the South Korean economy return to a long-term growth trend," said Kim Choong-soo, Bank of Korea governor. Without lowering borrowing costs that would boost spending among businesses and consumers, policymakers believed the actual growth in South Korea was expected to lag behind its potential, Kim added. The central bank said that some economic indicators in the U.S. have shown signs of deterioration and that the sluggishness of economic activities in the euro zone has deepened. Economic growth in South Korea will be weaker than previously expected as exports and domestic demand, two key growth engines, both remain at low levels. South Korea joins other central banks in monetary easing. Last week, the European Central Bank cut its key interest rate by a quarter of a percentage point to a record low in an effort to boost its sagging economy. China's central bank also lowered its key interest rate for the second time in a month. South Korea' finance ministry said in June that it expected the economy to expand 3.3 percent this year from 2011, below an earlier forecast of 3.7 percent. The Bank of Korea is scheduled to release its forecast on the economy on Friday. Market analysts said the Bank of Korea is likely to further ease its monetary policy ahead of December presidential elections as its focus now seems to have moved to growth over price stability. -- SPA
