South Korea’s President Yoon says interest rate cut unavoidable, to align with US

SEOUL : South Korea’s President Yoon Suk Yeol on Wednesday said aligning the country’s interest rate with the U.S. to some extent is unavoidable in order to prevent capital outflows, nudging the central bank to cut policy rates.

“We are not like Japan are we? We cannot help but to take similar steps with the U.S. when it comes to interest rates, as when we try to maintain some gap with the U.S., the interest rate differential leads to dollar outflows,” Yoon said in a televised news event after announcing major economic policies for the second half.

Yoon’s comments add to pressure on the Bank of Korea to cut interest rates currently at a 15-year high of 3.50 per cent after the BOK extended its rate pause for an 11th straight meeting in May.

Median forecasts show analysts see the benchmark interest rate will remain unchanged through the third quarter before a 50 basis-point cut in the fourth quarter, as some pushed back their timing of cuts after the stronger-than-expected GDP data.

South Korea’s Prime Minister Han Duck-soo, present at the news event, made similar comments to Yoon, saying the country’s benchmark interest rates are likely to be lowered along with the global trend as major central banks prepare to cut interest rates in the second half.