Rate-Cutting MPC Members Express Unified Concern Over Export Slowdown: "Lower Rates to Boost Growth"

Bank of Korea Releases Monetary Policy Committee Meeting Minutes

Lee Chang-yong, Governor of the Bank of Korea (left), is presiding over the Monetary Policy Committee meeting held at the Bank of Korea in Jung-gu, Seoul, on the 28th of last month. Photo by Joint Press Corps

As of the 28th of last month, members of the Bank of Korea's Monetary Policy Committee who lowered the base interest rate were found to have been deeply concerned about the slowdown in Korea's exports and downside risks to the economy.

According to the minutes of the Monetary Policy Committee meeting held on November 28, released by the Bank of Korea on the 17th, Committee Member A, who advocated for the rate cut, assessed that "the domestic economy showed a moderate recovery in consumption, while downside risks centered on exports have increased."

Member A stated, "Exports underperformed expectations in the third quarter, and due to the continued economic slowdown in China, expanded low-priced exports of excess production overseas, and the economic policies of U.S. President-elect Trump, the growth trend is expected to slow down going forward," adding, "It is desirable to lower the base interest rate to address the increased downside risks to exports and the sluggish domestic demand recovery."

Committee Member B, who also supported the rate cut, said, "The domestic economy maintained a moderate recovery in domestic demand, but the export growth slowed, causing the third-quarter economic growth rate to fall below initial forecasts, weakening the growth trend," and judged, "As downside pressure on economic growth increases, it is necessary to mitigate these risks through an additional base rate cut."

Concerns were not only about the sluggish exports and domestic economic growth but also about the policies of the Trump administration following the U.S. presidential election. Committee Member C, who advocated for the rate cut, diagnosed, "Our economy's export momentum, which has driven growth so far, is weakening, and given the very high export dependence on the U.S. and China, it is inevitable that we will be more sensitive to changes in U.S. policy direction compared to other countries."

He added, "Domestically, it is time for monetary policy to actively respond by reinforcing the weak domestic demand recovery and externally to the global economic contraction caused by increased uncertainty," concluding, "Considering these circumstances comprehensively, it is appropriate to lower the current base interest rate to 3.00% at this meeting, following the previous one."

However, Committee Member D, who argued for maintaining the current rate, shared the same view on downside economic risks but expressed concern over the elevated won-dollar exchange rate. Member D stated, "The higher exchange rate is expected to exert upward pressure on inflation," and argued, "Since significant volatility in the won-dollar exchange rate is expected to persist for a considerable period, it is necessary to remain vigilant about related risks."

This content was produced with the assistance of AI translation services.