South Korea's central bank has lowered the nation's key interest rate by 25 basis points in a surprise move.
In its monthly monetary policy meeting on Thursday, the Bank of Korea(BOK) decided to cut the rate to a record low 1.25%, according to Korea's (KBS WORLD) radio.
It marks the first rate cut in a year after the BOK lowered the rate to 1.5% last June.
The BOK was widely expected to stand pat on the interest rate, but a weak economy and anticipations for a delayed US rate hike appear to have pushed the bank to slash rates.
Following the unanimous decision, BOK Governor Lee Ju-yeol told reporters that the South Korean economy faces greater downside risks, citing the current corporate restructuring for shipping and shipbuilding companies.
The South Korean shipbuilding industry is mired in serious financial woes due to a slump and oversupply in the global market. The restructuring in the core industrial sector is expected to lead to big job losses and fan a decline in the already weak economy.
According to the government's restructuring plans unveiled Wednesday, shipbuilding firms are expected to downsize their workforce by about 30% and production facilities by 20% by 2018.
The monetary policy committee also appears to have taken into consideration disappointing job market data in the US, which has made it unlikely that the Fed will hike rates this month. There have been concerns that if South Korea lowers rates while the US increases, it may lead to a quick outflow of foreign funds.
The government welcomed the decision to slash the rate, expressing hope that it would revitalize the economy.