SKorea cuts benchmark rate for 2nd time this year

YOUKYUNG LEE, AP Business Writer

SEOUL, South Korea -- South Korea's central bank trimmed the key interest rate Thursday for a second time this year, as Asia's fourth-largest economy faces mounting threats from the protracted debt crisis in Europe and the slowing growth in the world economy.

Bank of Korea's seven-member policy board lowered the benchmark seven-day repurchase rate by a quarter of a percentage point to 2.75 percent, a central bank official said.

Bank of Korea Governor Kim Choong-soo is scheduled to speak to reporters later in the day.

The central bank lowered borrowing costs for the second time this year after holding the rate steady in the previous two months. The last rate reduction was in July, which was the first rate cut in more than three years.

Market analysts widely predicted the rate cut this month as the latest economic data showed growth in South Korea's economy was losing steam with weakening overseas demand for South Korean goods.

The strengthening of the local currency against the U.S. dollar was also feared to hurt price competitiveness of exporters, adding pressure to South Korea's trade-reliant economy and reinforcing the case for the rate cut.

On Tuesday, the International Monetary Fund reduced its forecasts for South Korea's economy by 0.3 percentage point to 2.7 percent this year and estimated 3.6 percent growth for next year, down from 3.9 percent.

Analysts expect that the Bank of Korea, which revised down its outlook for South Korea's economy to 3 percent in July, will further reduce its growth forecast for 2012 and 2013 in its scheduled announcement later in the day.