A wave of rate cuts sweeps the globe, and the Bank of Korea's rate cut is now in place!

On October 11th, local time, the Bank of Korea (central bank) lowered the benchmark interest rate by 0.25 percentage points, from 3.5% to 3.25%, in line with market expectations. It is reported that this is the first time the Bank of Korea has eased its monetary policy in 38 months.

After the Federal Reserve cut interest rates by 50 basis points and hinted at further rate cuts in the future, market expectations for the Bank of Korea to shift to an accommodative policy in the coming months have heated up.

A previous survey showed that several economists predicted that the Bank of Korea would cut interest rates by 25 basis points to 3.25% at Friday's meeting. Due to inflation being below target and economic activity data showing further economic slowdown, it is expected that the Bank of Korea will start an easing cycle at the scheduled monetary policy meeting (October 11th).

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Data shows that South Korea's Consumer Price Index (CPI) in September fell to its lowest level in three and a half years, dropping below 2% for the first time since the beginning of 2021, providing a reason for the Bank of Korea to cut interest rates. Data from the Korean Statistical Office shows that South Korea's CPI rose by 1.6% year-on-year in September, the lowest increase since February 2021. After excluding the more volatile food and energy prices, the core CPI rose by 2.0% year-on-year in September.

Several analysts believe that the Bank of Korea will slow down the pace of interest rate cuts because curbing real estate prices and the increase in household debt are still important considerations. Although the macroeconomic conditions for interest rate cuts are becoming increasingly apparent, considering financial stability, especially the concern that rate cuts may stimulate the real estate market, the Bank of Korea will act cautiously.

On October 11th, the South Korean Composite Index opened up by 0.53%, briefly surged, and then fluctuated and corrected. In terms of industry sectors, construction, retail, electrical appliances, and pharmaceutical sectors slightly rose.

In addition to South Korea, New Zealand also announced a rate cut this week. On October 9th, the Reserve Bank of New Zealand (central bank) announced that it would lower the benchmark interest rate by 50 basis points to 4.75%. This is the second rate cut by the New Zealand central bank since August this year.