US Fed’s rate cut gives room for easing monetary policy: BOK

South Korea’s central bank chief said Thursday that the latest US rate cut has created some policy space for easing actions amid the slowing economy.

“The US Federal Reserve’s rate cut alleviates the burden for other countries in operating their own monetary policies,” Bank of Korea Gov. Lee Ju-yeol told reporters.

On Wednesday local time, the Fed cut the base rate by a quarter percentage point to a range of between 1.75 percent and 2 percent. This was its second rate cut in two months, reflecting the its easing response to a potential economic slowdown.

The US rate cut will have limited impact on Korea’s monetary policy actions, according to the BOK chief.

“The decision was largely anticipated and the Fed has been consistent when it comes to its future policy directions,” he said.

“The Fed is not shutting out the possibility of further rate cuts. It is likely to take (additional measures) if necessary to boost the economy.”

But the latest rate cut also partly implied a hawkish stance. The Fed had not given out clear signals of an additional rate cut beforehand, he added.

In step with the global trend to respond to the slowing economy, the BOK also cut the key base rate to 1.5 percent in July, citing growing external risks.

There are speculations it is likely to undertake another cut either in October or November.

“(The BOK’s monetary policies) will consider the heightened geopolitical risks such as the US-China trade conflict,” the central bank chief said.

“We will also have to keep a close watch on the situation in the Middle East as oil prices have an extensive impact on our economy.”

By Bae Hyun-jung (tellme@heraldcorp.com)