SEOUL - South Korea's central bank on Tuesday cut its policy rate by a quarter percentage point on the back of a dimmer growth outlook for the Asian economy.

Bank of Korea (BOK) Governor Rhee Chang-yong and other monetary policymakers decided to lower the benchmark seven-day repurchase rate by 25 basis points to 2.75 percent. The decision was made by unanimous consent.

It was in line with market expectations. According to the Korea Financial Investment Association's poll of 100 fixed-income experts, 55 percent predicted the rate cut this month.

Four of the six monetary policymakers projected a rate freeze for the next three months, while the remaining two opened a possibility for an additional rate cut in the three-month period.

The BOK slashed the key rate each by 25 basis points in October and November last year, before putting it on hold in January this year.

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This month's rate cut came after the gloomier growth forecast for the South Korean economy.

The BOK revised down South Korea's growth outlook for 2025 by 0.4 percentage points to 1.5 percent, while the forecast for 2026 was changed to 1.8 percent compared to three months earlier.

Governor Rhee told a press conference that the downward revision was affected by mounting uncertainties involving the US tariff policy of President Donald Trump's administration and South Korean President Yoon Suk-yeol's martial law imposition that was revoked hours later in December last year.

Real gross domestic product (GDP), adjusted for inflation, increased 2.0 percent in 2024, 0.2 percentage points lower than the BOK's earlier estimate

The seasonally adjusted real GDP inched up 0.1 percent both in the third and fourth quarters of last year compared to the previous quarter, after retreating 0.2 percent in the second quarter.

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Construction investment diminished 3.2 percent in the fourth quarter on a quarterly basis, while private consumption edged up 0.2 percent in the cited quarter.

The BOK said in a statement that although concerns about foreign exchange markets remained, inflation stabilization continued along with an ongoing slowdown in household debt while the growth rate was forecast to fall significantly.

The central bank noted that it was appropriate to further cut the base rate and mitigate downward pressure on the South Korean economy.

Consumer prices rose 2.2 percent in January from a year earlier, marking the fastest increase in six months.

The headline inflation showed an upward tendency in recent months from 1.3 percent in October to 1.5 percent in November and 1.9 percent in December last year.

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Debts owed by households to deposit-taking banks reduced for the second consecutive month in January on lower demand for credit loans.

Concerns lingered over a broad gap between the South Korean and the US interest rates.

The US Federal Reserve froze its target range for the federal funds rate at 4.25-4.50 percent in January, leading to a rate difference with South Korea at 1.75 percentage points.