South Korea’s central bank cut its benchmark interest rate on Thursday and downgraded its 2025 growth outlook, signaling mounting concerns over economic weakness amid global trade uncertainty. The Bank of Korea lowered its key seven-day repurchase rate by 25 basis points to 2.50%, resuming its monetary easing cycle after a brief pause earlier this year.

The rate cut was widely anticipated by economists, with all 12 analysts surveyed by The Wall Street Journal forecasting the move. The central bank had already reduced rates in February, October, and November of 2024. This latest action reflects the growing pressure from slowing global demand and escalating U.S. tariffs, which have weighed heavily on South Korea’s export-driven economy.

Alongside the rate decision, the Bank of Korea sharply lowered its GDP growth forecast for 2025 to just 0.8%, down from its earlier estimate of 1.5% made in February. That would mark a significant slowdown compared to the 2.0% growth estimated for 2024, highlighting the challenges facing Asia’s fourth-largest economy.

Despite the dimmed outlook for growth, the central bank maintained its inflation forecast at an average of 1.9% for the year. The unchanged inflation view suggests that price stability is not the central concern at present, giving policymakers more flexibility to support the economy through monetary stimulus.

With weak external demand, particularly from China, and rising global trade headwinds, the Bank of Korea’s latest move reflects a growing urgency to shield the economy. Economists now expect further rate cuts may be on the table if economic conditions continue to deteriorate.