SKorea’s central bank cuts key rate for first time in 7 months to 2.5 per cent

SEOUL, South Korea – South Korea’s central bank on Thursday cut its benchmark interest rate for first time in seven months to 2.5 per cent.

Bank of Korea said it trimmed the rate by a quarter of a percentage point for this month. The decision was a surprise since markets expected a rate freeze.

Last month, the Bank of Korea resisted calls for a rate cut from the government, saying that the country’s economy, Asia’s fourth-largest, was on track for slow recovery. The bank reduced borrowing costs twice last year, in July and October.

The move follows a government stimulus plan to create jobs and shield the economy against the yen’s slide, which is hurting South Korean exporters. Parliament approved $15.3 billion extra budget on Tuesday.