Bank of Korea Makes Surprise Rate Cut to 3.00% at Second Straight Easing Meeting and Lowers Growth Outlooks
South Korea's central bank, the Bank of Korea (BOK), cut its base rate by 25 basis points to 3.00% from 3.25% at its monetary policy meeting on Nov 28, 2024 — a surprise decision that delivered a second consecutive quarter-point reduction and signalled that reviving sagging growth now takes priority over currency and household-debt concerns.
Surprise second consecutive cut takes the base rate to 3.00%
SEOUL, Nov 28, 2024 — The Bank of Korea lowered its base rate by 25 basis points to 3.00% from 3.25% at the monetary policy meeting held on Nov 28, 2024, Yonhap News Agency reported. The decision was a surprise: analysts had largely expected the bank to keep the rate unchanged, yet the committee chose instead to extend the easing cycle opened only a month earlier.
The November step was the second consecutive quarter-point reduction. The sequence of the two 2024 cuts is as follows:
- October 2024 — a quarter-point cut, the first easing pivot since August 2021 and the first rate cut since May 2020;
- November 2024 — a further reduction of 25 basis points, taking the base rate from 3.25% to 3.00%;
- the November meeting itself — a surprise outcome against market expectations of a hold.
Two consecutive reductions at two successive meetings mark a clear change of direction for the Bank of Korea after a multi-year stretch in which the policy rate was never lowered. The October move ended a pause in easing that had lasted since August 2021 and stood as the first cut since May 2020; the November move confirmed that the October step was not a one-off adjustment but the beginning of a cycle.
Why the November decision surprised analysts
Market participants had largely priced in a hold at the November meeting. Two constraints stood behind that expectation: the won trading near 1,400 per dollar, which narrows the room for easing without adding pressure to the currency, and persistent concerns about household debt, which makes cheaper credit a sensitive issue for financial stability.
By cutting anyway, the Bank of Korea signalled that reviving sagging growth now takes priority in its policy calculus. The surprise character of the decision lies precisely in this ordering of priorities: with the currency weak and household leverage elevated, the bank chose to support the economy rather than to wait for the external pressure on the won to subside.
Growth outlook lowered: 2.2% for 2024 and 1.9% for 2025
Alongside the rate decision, the Bank of Korea lowered its growth outlook. The forecast for 2024 was cut to 2.2% from 2.4%, and the forecast for 2025 to 1.9% from 2.1%. As reasons, the bank cited slowing exports and uncertainty over the tariff policies of the incoming U.S. administration.
The combination of a weaker growth path and an external environment clouded by tariff uncertainty frames the November cut as growth insurance. With the export engine losing momentum and the trade policy of the incoming U.S. administration still unclear, the bank revised its projections down for two years at once and eased policy at the same meeting, tying the rate path directly to the deteriorating growth picture.
Inflation at a 45-month low leaves room for easing
The price data removed the main obstacle to easing. In October 2024 consumer prices rose 1.3% year on year — the slowest pace in 45 months and a second straight month below the 2% mark. Core inflation, which excludes volatile components, stood at 1.8%.
The Bank of Korea also revised its consumer price forecasts downward:
- for 2024 — lowered to 2.3%;
- for 2025 — lowered to 1.9%.
With headline inflation at a 45-month low, core inflation at 1.8% and both consumer price forecasts revised down, the price side of the mandate no longer argued against easing. That left the growth side — the lowered outlooks of 2.2% for 2024 and 1.9% for 2025 — as the decisive argument for the surprise cut of Nov 28, 2024, and for the second consecutive quarter-point step of the easing cycle that began in October.
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