* BOK takes policy interest rate below 1% for first time
* BOK says rate cut to minimise risks from coronavirus
* BOK has not made a cut through emergency meeting since 2008 (Recasts after Governor Lee’s press conference)
By Cynthia Kim and Joori Roh
SEOUL, March 16 (Reuters) – The Bank of Korea slashed interest rates by 50 basis points on Monday in its largest policy easing since the global financial crisis, joining central banks from the United States to Japan in trying to soften the economic blow dealt by the coronavirus pandemic.
Convening an emergency meeting of its monetary policy board, BOK also lowered borrowing costs for the bank’s cheap loan programs and relaxed collateral rules of its repurchasing operations, to ensure companies can easily and cheaply access credit.
“We have put every viable policy option the BOK can take on table, although I can’t detail specifics now,” Governor Lee Ju-yeol said after the seven-member panel cut the base rate to 0.75%, the lowest since the bank adopted the current policy system in 1999.
“As uncertainties are high, we will closely monitor the FX swaps market and currency market.”
The BOK has not made a cut in rates at an interim policy board meeting since October 2008, when Asia’s fourth largest economy was reeling from the global financial crisis.
The move to cut the seven-day repurchase rate comes after the Federal Reserve slashed interest rates to near zero on Sunday in another emergency move. Central banks in New Zealand and Japan had also loosened their monetary stance after the Fed’s action.
Asked how low rates could go, Governor Lee said it depended on financial and monetary policy conditions around the world.
Lee has previously said lowering rates too far could spark a massive capital outflow or a liquidity trap, undermining the goal of boosting the economy.
“I’d say it (the BOK) has used all its firepower to cut interest rates. Don’t see any further cuts coming for now,” said Cho Yong-gu, fixed-income analyst at Shinyoung Securities.
Asia’s fourth largest economy is battling the region’s biggest outbreak of coronavirous outside China with more than 8,000 infections, increasing the risk of recession as consumers stay home, business activity dwindles, while exports suffer from falling demand abroad.
South Korea has been experiencing a downward trend in new cases, and Monday’s 74 new infections are significantly lower than the peak of 909 new cases reported in a single day in late February.
The government has drawn up a $9.8 supplementary budget and declared the hardest hit provinces “special disaster zones” which will get subsidies and tax exemptions.
Onshore financial markets had closed by the time the BOK announced its rate decision.
The central bank cut rates in July and October last year.
Governor Lee said the bank’s April 9 policy rate review meeting will be held as scheduled.
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