SEOUL – South Korea’s central bank lowered its benchmark interest rate for a second straight month and said the country’s economy would grow more slowly than initially expected.

Following a policy meeting, the Bank of Korea cut its benchmark interest rate by a quarter of a percentage point, to 3 percent. The bank lowered its outlook for the country’s economic growth to 2.2% from 2.4% for this year and to 1.9% from 2.1% for 2025.

The bank is taking steps to reduce borrowing costs despite the lingering effects of high inflation and alarming levels of household debt as the economy falters.

The bank lowered its benchmark rate by a quarter of a percentage point to 3.25% in October, its first rate cut since May 2020, in the depths of the COVID-19 pandemic.

The bank said the country’s trade-dependent economy faces growing uncertainty over global economic trends and inflation, which could be affected by President-elect Donald Trump’s policies and ongoing geopolitical conflicts. .

Since his re-election, Trump swore to impose huge new tariffs on foreign goods entering the United States, including those from Mexico, Canada and China, which he says will create more domestic jobs and reduce the federal deficit.

At a news conference, Bank of Korea Governor Rhee Chang Yong said the bank faced a difficult decision: to freeze or cut rates. But a larger-than-expected drop in exports in the last quarter and Trump’s election victory shook things up.

“We anticipated the uncertainty that the results of the U.S. presidential election would bring, but we did not expect a ‘red sweep’ where the House and Senate were all won by one side,” Rhee said.

Rhee said Trump’s victory “has increased political uncertainty, not only for us but for the world,” but said it was too early to predict how Trump’s tariff measures would impact South Korean exports.

Cutting rates could help boost domestic consumption by pumping more money into the economy, but it is unlikely to reverse a slowdown in exports caused by long-term competitiveness issues in key sectors that should be addressed through policy changes or restructuring, Rhee said. .

Rhee said three of the six members of the monetary policy committee believe the bank should cut rates further over the next three months to help revive the flagging economy. The bank will closely monitor developments in household debt and house prices before considering further reduction, he said.

The bank said in a statement that South Korea’s economy was losing momentum due to weak domestic spending, slowing exports and rising unemployment.

“Going forward, domestic consumption will experience a slight recovery, but the recovery in exports will likely be weaker than initially expected due to intensifying competition and strengthening protectionist trade policies in key sectors,” says the report.