SEOUL, June 11 (Korea Bizwire) — South Korea’s central bank on Thursday lowered the base rate to a record low of 1.5 percent amid growing concerns the country’s first-ever outbreak of Middle East Respiratory Syndrome (MERS) will likely dent growth and consumption.
In the monthly rate-setting meeting, the Monetary Policy Committee of the Bank of Korea (BOK) voted to cut the base rate by a quarter percentage point, sending the policy rate lower by a cumulative 1 percentage point via four rate cuts since August last year.
The move was in line with a poll by Yonhap Infomax, the financial news arm of Yonhap News Agency. Nine out of 17 analysts and economists had projected the BOK would take action to contain growth risks stemming from the spread of the viral respiratory illness.
South Korea has emerged as the world’s second-most MERS-infected country after Saudi Arabia, with the number of infections hitting 122 since the outbreak was first confirmed May 20. As of Wednesday, nine people had died and more than 3,000 people were in quarantine for possible infection.
The unprecedented event has spurred fears it may hit domestic demand, on the verge of recovery, and hinder growth in Asia’s fourth-largest economy that is already ailing from sluggish exports as global demand remains tepid, and the euro and yen are weak.
A handful of government organizations and financial firms have recently slashed their growth forecasts for the country amid growing alarm over weak trade. Overseas shipments dropped 10.6 percent on-year in May, falling the most in almost six years.
Still nearly half of the survey respondents had forecast the BOK would extend its wait-and-see approach to curb household debt growth and ease potential shockwaves from a U.S. Federal Reserve rate hike expected later this year.