BOK to make interest rate decision, revise growth forecast for 2025 on Tuesday

Welcome to Within The Frame, where we bring the most pressing issues across the globe into focus, I'm Kim Mok-yeon.

With mounting pressure amid sluggish forecasts for Korea's economic growth rate this year, all eyes are now on the Bank of Korea's upcoming Monetary Policy Committee meeting set to be held on February 25th.

Experts anticipate a rate cut from the current 3 percent to 2.75 percent—a decision that follows recent moves to lower rates in October and November, after a period of stability last month.

The Bank of Korea's chief has also signaled a downward revision of the nation's growth outlook, reducing the forecast from 1.9 percent to about 1.6 percent.

Should these adjustments materialize, this year will mark the first time Korea's annual growth rate drops below the 2 percent threshold.

For further insights into these developments, we connect to Kim Yong-jin, Professor at Sogang Business School. Welcome.

Also joining us is Chai Sang-mi, Professor of Business Administration at Ewha Womans University. Great to have you with us.

1. (Kim) So Professor Kim, the Bank of Korea's Monetary Policy Committee will decide the February benchmark interest rate tomorrow. The focus seems to be on interest rate cuts to stimulate domestic demand. What is your forecast?

2. (Chai) Now to Professor Chai, Exchange rate volatility is a key factor in deciding the benchmark interest rate. Can we say that the focus on an interest rate cut in the February meeting is because the volatility of the Korean won-U.S dollar exchange rate has somewhat stabilized? What is the current situation in the foreign exchange market?

3. (Kim) A low domestic economic growth forecast is also cited as a factor for the expected interest rate cut. Domestic and international organizations are predicting Korea's growth rate will be in the 1-percent range this year. Professor Kim, what do you think is the biggest downside risk to the economy right now?

4. (Chai) Meanwhile, the Bank of Korea is expected to announce its revised economic forecast along with the benchmark interest rate decision. The Bank of Korea previously forecasted the growth rate to be 1.9 percent this year. Prof.Chai, How do you expect the Bank of Korea's economic growth forecast to be revised?

5. (Chai) If the Bank of Korea cuts the interest rate, the current 1.50-percent point gap between Korea and the U.S. will widen. What impact will the widening of the Korea-U.S. interest rate gap have on the financial markets?

6. (Kim) On the other hand, considering the U.S. Federal Reserve's pace of interest rate cuts and the record-high household debt from last year, some analysts believe that a freeze cannot be entirely ruled out. What are your thoughts on this Prof. Kim?

7. (Kim) We'll still have to wait and see but if we do assume an interest rate cut in February, when could we expect the next rate cut? Also, what is your forecast for the final interest rate by the end of the year?

8. (Chai) Now in order to stimulate the economy, both the business and political sectors agree on the need for a supplementary budget, but there are differences in the scale and timing of it. What are your views on the scale and timing of the supplementary budget Prof.Chai?

9. (Kim) Meanwhile, regarding one of the downside risks to the economy, the Trump-era tariff policy, last week, Deputy Minister Park Jong-won from the Ministry of Trade, Industry and Energy, along with a private economic delegation, visited the U.S. to engage in diplomatic efforts. Prof. Kim, What negotiation strategies should be prepared for the future?