In a regular session of the Monetary Policy Committee held on Thursday (Dec. 11), the Bank of Korea decided to lower the benchmark interest rate by 1 percentage point from the current 4 percent to 3 percent.

The 3 percent benchmark rate is 0.25 percentage points lower than the previous all-time low of 3.25 percent (Nov. 11, 2004). The BOK has now lowered the benchmark rate four times this year. The central bank lowered the rate from 5.25 percent to 5 percent on Oct. 9, to 4.25 percent on Oct. 28, and to 4 percent on Nov. 7.

On why it had decided to lower the benchmark interest rate again, the central bank cited sluggish domestic business and slowing exports.

Both manufacturing and service industries are also performing poorly. Despite the slow increase in consumer prices since July, when they rose 5.9 percent, the prices of basic necessities, except for oil products, are still rising, the BOK said.

The current account balance has turned positive, with the goods account turning into a surplus and the service account posting a smaller deficit.

Meanwhile, economic growth will slow down at a rapid pace, given the worsening financial and economic conditions at home and abroad and sluggish domestic demand, the central bank predicted.

The central bank said the upward trend of commodity prices will likely slow down due to stable international prices of raw materials and sluggish demand, and given that the current account surplus will likely be maintained in the wake of the goods account surplus and the improved service account.