South Korea cuts interest rate to record low 1.75%

SEOUL - South Korea's central bank made a surprise quarter-percentage point cut to its benchmark interest rate on Thursday, taking it to an all-time low of 1.75 per cent, reflecting continued concerns over deflation and the pace of growth.

It was the first cut since October when the Bank of Korea (BOK) took the rate down to a record-equalling low of 2.0 per cent - a level last seen in 2009-10 when Asia's fourth-largest economy was seeking to recover from the global financial crisis.

The country's inflation has remained stubbornly below the central bank's target rate of 2.5 per cent to 3.5 per cent for almost three years.

Slumping oil prices saw on-year inflation fall to 0.5 per cent in February, the lowest rate for 15 years, deepening fears of Japan-style deflation that could hammer an overgrown property market.

The central bank in January slashed its economic growth forecast for this year to 3.4 per cent from the previous 3.9 per cent, while it lowered its inflation outlook to 1.9 per cent from the 2.4 per cent previously stated.

Seoul's finance minister Choi Kyung-Hwan also voiced deflation concerns earlier this month, warning that Seoul risked following a similar step taken by Japan during its "Lost Decade".

Thursday's unexpected rate cut came as the world's major economies including the eurozone continue to slash rates or launch massive monetary easing policies to boost growth.