SEOUL, Oct. 15 (Xinhua) -- South Korea's central bank on Wednesday lowered its policy rate from 2.25 percent to 2 percent, marking the record low and the identical rate maintained during the global financial crisis.
Bank of Korea (BOK) Governor Lee Ju-yeol and six other policy board members decided to lower the benchmark seven-day repurchase rate by 25 basis points to 2 percent after cutting it by a quarter percentage point in August.
The 2-percent rate was the record low that had been maintained for 17 months from February 2009 to boost the economy at the peak of the global financial crisis.
The rate cut was widely expected as Finance Minister Choi Kyung- hwan pressured the central bank to lower rates further to boost the lackluster growth momentum.
Sentiment among economic agents worsened after the April ferry sinking disaster, which claimed more than 300 lives, mostly high school students. Consumers refrained from entertainment and travel as deep grief swept over the entire country. Confidence among consumers and businesses had yet to recover the pre-disaster levels.
"Facility investment remained sluggish, and sentiment among economic agents showed limited recovery," the BOK said in a statement after the rate-setting meeting.
The BOK downgraded its assessment on the global economic conditions from "the European economic recovery is pausing" in September to "the economy is sluggish," saying the global economy is feared to be affected by the prolonged economic slowdown in Europe.
The International Monetary Fund lowered its growth outlook for the euro area last week, and the Organization for Economic Cooperation and Development warned over the worsening growth in Germany, the largest economy in Europe.
On the domestic front, industrial output reduced 0.6 percent in August from a month earlier, the first reduction in three months. It triggered the government to unveil additional fiscal stimulus package worth 5 trillion won (4.7 billion U.S. dollars) after announcing a 40 trillion won package three months earlier.
Inflationary pressures remained low, leaving room for the BOK cutting rates further. Minister Choi said on Sept. 16 that the BOK had "sufficient policy room" given the still high level of policy rate compared with those in advanced economies such as the United States and Japan.
Consumer prices rose 1.1 percent in September from a year earlier, staying in the 1-percent level for 22 months in a row. The inflation rate was far below the BOK's inflation target band of 2.5-3.5 percent. The BOK statement said inflationary pressures would get weaker than earlier expected.
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