South Korea’s central bank needs to cut policy rate to near zero: government think-tank

SEOUL (Reuters) – A South Korean state-run think-tank said on Wednesday the central bank should cut benchmark interest rates to near zero to support an economy hit by the coronavirus pandemic.

“There is a need to lower the benchmark interest rate to near zero percent,” the Korea Development Institute (KDI) said in a report. “Unconventional policy tools, such as directly purchasing treasury bonds, need to be actively deployed as rate cuts are unlikely to be enough to support economic recovery and boost inflation.”

The Bank of Korea slashed interest rates by 50 basis points to a fresh low of 0.75% in March, in its largest policy easing since the global financial crisis, and signalled strong appetite for further cuts in April.

The BOK next reviews policy on May 28.

(Reporting by Cynthia Kim; Editing by Sam Holmes)