South Korea cuts interest rates again

The Bank of Korea has announced the reduction of interest rates to just 3 percent ad the Governor Lee Seong Tae cut rates by 1 percent which is well above economists expectations.

However given the speed at which the nation’s economy has receeded the action was desperately needed in order to avert the economic crisis and recession hitting for the first time in over ten years.

Following the announcement the Wom has rebounded by 3.6 percent on the optimism that the cut will aid the economy.

South Korea’s manufacturing hub has been hit hard with both forcing Hynix Semiconductor Inc and Hyundai Motor Co forced to reduce output and cut costs with redundancies sure to follow.

The banks move has not only been driven by necessity but also by increased opportunity as inflationary pressured have cooled alongside the global slowdown.

Exports account for up to 40 percent of gross domestic product and compared to last years they have fallen by 18 percent and so the aim is to get exports back on track and avoid further job losses.

The good news is the South Korea’s current account is still positive and the trade surplus expected to increase as the service account improves, although the full percent point cut is still a huge surprise.

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