Bank of Korea Announces Plans for Rate Cuts

In a move to address the growing pressures of an economic slowdown, the Bank of Korea (BOK) has revealed its strategy to further reduce the base interest rate in the upcoming year. The decision, outlined in the "2025 Monetary Credit Policy Operation Plan," aims to navigate through the heightened political uncertainties and global competition that have increased downside risks to the economy.

Ensuring Financial and Foreign Exchange Market Stability

The BOK emphasized the importance of maintaining stability in financial and foreign exchange markets as a key objective of its monetary credit policy. In response to the significant uncertainty in policy conditions, including the new U.S. administration's economic policy direction and geopolitical risks, the BOK plans to enhance early warning systems and implement market stabilization measures as needed.

Reforms and Innovations in the BOK's Lending System

Further reforms to the BOK's lending system are on the agenda, with measures aimed at enabling financial institutions to use loan assets as eligible collateral for BOK loans. Additionally, the BOK, in collaboration with other financial regulatory bodies, plans to test the use of institution-oriented central bank digital currency (CBDC) and deposit tokens in real transactions next year.