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BOK hails US rate cut, says may remove uncertainties

South Korea's central bank on Thursday welcomed the latest US rate cut, saying it may help remove some uncertainties facing Asia's fourth-largest economy.

"We believe a US rate cut generally works toward boosting the economy and raising stock prices. It will support global growth and certainly have a positive effect on the global economy," said Yoon Myun-shik, senior deputy governor of Bank of Korea.

The remarks came hours after the US Federal Reserve slashed its key rate by 25 basis points to a range of 1.5 percent to 1.75 percent.

Yoon Myun-shik, senior deputy governor of Bank of Korea. (Yonhap)
Yoon Myun-shik, senior deputy governor of Bank of Korea. (Yonhap)

Yoon insisted the US rate cut will not automatically lead to a rate reduction in the South but noted it will certainly be a factor affecting future monetary policy decisions here.

"The Fed's monetary policy decision is not the only factor we must consider," he told reporters.

"Basically, a monetary policy decision is based on local economic conditions and the economic growth rate, but the Fed's monetary policy is, of course, one of the various factors that need to be considered," the BOK official added.

Yoon also noted the latest US rate cut may have expanded the room for South Korea's own policy maneuvers.

"In that sense, we believe (the US rate cut) may somewhat remove our concerns over a capital outflow," he said.

A possible capital flight has been an issue for Asia's fourth-largest economy at least since July when the BOK made its first rate cut in three years, sending its policy rate to 1.5 percent and then widening the gap between its own base interest rate and that of the US to a maximum 1 percentage point.

The BOK monetary policy board again slashed the key rate this month, matching the all-time low of 1.25 percent.

"The BOK's stance is it will maintain its accommodative monetary policy and that any additional rate reduction will be based on a comprehensive review (of various factors)," Yoon said. (Yonhap)