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The Korea Development Institute (KDI) – a South Korean state-run think-tank, said in a report on Wednesday, Bank of Korea (BOK) is needed to cut its benchmark interest rates to near-zero to stimulate the economy hit by the coronavirus pandemic.

Key takeaways

“There is a need to lower the benchmark interest rate to near zero percent.”

“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 South Korean central bank announced a 50bps rate cut in March, bringing its key rate down to a record low of 0.75%. The BOK left doors open for further rate cuts, with the May 28 policy meeting now in focus.

Market reaction

On the above report, the Korean won (KRW) refreshed session lows against the US dollar, with USD/KRW hitting 1,228.50 highs.

At the press time, the cross adds 0.15% to trade at 1,226.90.