Bank of Korea Cuts Key Rate to 2.50% Amid Growth Concerns

South Korea's central bank cut its key policy interest rate by 25 basis points to 2.50%, marking the fourth reduction in the current easing cycle and bringing borrowing costs to their lowest level since August 2022. The rate cut aims to stimulate economic growth following a contraction in the first quarter of 2025 and easing inflation amid concerns over a global economic slowdown. The decision also responds to external challenges, including uncertainties caused by U.S. tariff policies and political turmoil within South Korea, particularly the recent strained trade relations with the U.S. and upcoming elections. Experts anticipate further rate cuts may occur later this year depending on economic developments. Despite the rate cut, private consumption remains weak, and banks are expected to be cautious in lowering household loan interest rates due to upcoming regulatory measures. The central bank's move reflects efforts to balance supporting growth while managing financial stability risks in a complex domestic and international environment.