South Korea's central bank unexpectedly slashed the base rate to a record low of 1.75 percent Thursday, putting efforts to shore up sluggish growth on top of concerns over the persistent increase of household debt.
The rate cut is the first since October, when the Bank of Korea (BOK) brought down the key rate to a then-record-matching low of 2 percent. The monetary policy committee had since then unanimously voted to keep the base rate on hold, according to South Korean Yonhap news agency.
"A quarter percentage point rate cut was deemed desirable as growth is expected to fall below forecasts and inflation is also expected to fall. We considered how there is a need to further boost economic recovery momentum even after last year's two rate cuts," BOK Gov. Lee Ju-yeol told reporters in a press conference.
The decision was the first split ballot in five months, with two policy board members voting to hold the rate, according to Lee. The BOK includes the names of dissenters in minutes released roughly three weeks after the policy decision.
A statement by the policy board also showed its perception of the economy soured starting in February when it left the base rate unchanged. The committee noted "sluggish movements" in domestic demand and said the negative output gap will remain "longer than anticipated." In addition to the rate cut, Lee vowed to expand the aggregate credit ceiling by a minimum 3 trillion won (US$2.6 billion) from the current 15 trillion won threshold.