South Korea cuts key rate to a historic low of 1.5%

seoul — South Korea’s central bank lowered its key interest rate to a historic low on Thursday, responding to a slump in exports and the prospect that the outbreak of the deadly Mers virus could slow the economy.

Bank of Korea policymakers cut the policy rate by a quarter of a per centage point to 1.5 per cent, the second rate cut this year. In March, the bank lowered the key rate and downgraded its growth forecast for Asia’s fourthlargest economy as exports continued to slump.

Consumption was on track to recover but began showing signs of contraction after the outbreak of Middle East respiratory syndrome last month, while the decline in exports widened, the central bank said in a statement.

Exports and imports continued to drop over a year earlier after the March rate cut due to sluggish global demand and a weak Japanese yen. The cheaper yen hurt Korean exporters, especially automakers that compete with Japanese rivals in the global market.

Analysts initially expected the central bank to leave the policy rate unchanged but that view changed this month as the Mers outbreak caused panic in South Korea. The outbreak has killed nine and infected more than 120 people since the first case, a 68-year-old man who had travelled to the Middle East, was diagnosed on May 20. About 3,800 people remained isolated on Thursday after possible contact with infected people, according to the Health Ministry.