Korean and South African Interest Rate Cuts to 2.5% and 7.25% – Currency Thoughts

Korean and South African Interest Rate Cuts to 2.5% and 7.25%

May 29, 2025

Central bank interest rates were sliced today by 25 basis points in both South Korea and South Africa.

South Korea‘s new Base Rate becomes 2.50%, its lowest level since October 2022. A peak of 3.5% had been maintained from January 2023 until an initial cut last October. Quarter percentage point reductions were also done in November and February. A statement accompanying today’s decision describes sluggish growth and predicts low and steady inflation. GDP fell 0.2% last quarter and recorded its first year-on-year decline (-0.1%) since late 2020. On-year CPI inflation averaged 2.1% over the first third of 2025.

After holding the South African policy interest rate at 8.25% from May 2023 until an initial 25-basis point cut in September 2024, three more reductions have now been made to 7.25%. All the moves have been by a quarter percentage point, but one of the six policy board members today favored a drop of 50 basis points. A statement of explanation tweaks the inflation target of 3-6%, proclaiming that officials will be aiming for the range floor of 3.0% rather than its mid-point of 4.5%. But projected growth has been lowered by a half percentage point in 2025 to 1.2%, and inflation this year is expected to 3.2%, down from a prior projection of 3.6%. The overall environment, therefore, should be conducive to more rate cutting.

Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: Bank of Korea, South Africa Reserve Bank

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on Thursday, May 29th, 2025 at 8:44 am and is filed under Central Bank Watch.
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