SEOUL (Reuters) - Most Bank of Korea board members saw a growing diplomatic dispute with Japan as a risk to economic growth at their last meeting in July but it was not the main driver behind their decision to cut interest rates, minutes of the meeting showed on Tuesday.
The central bank surprised markets by lowering rates at the July 18 meeting and shaved this year’s growth forecast to the lowest in a decade, as the trade row with Japan threatened to pile more pressure on an economy already struggling from sluggish exports and weak inflation.
A few members said Japan’s curbs on some exports to South Korea, which took effect two weeks before the meeting, were a risk to watch. But the dispute has deepened has since then, fueling talk that another rate cut is needed.
The July cut was the BOK’s first in three years and came sooner than expected. Markets are pricing in at least one more cut this year. The next policy meeting will be held on Aug. 30.
Reporting by Joori Roh; Editing by Kim Coghill