South Korea's central bank cut the key interest rate for the first time in more than three years on Thursday, underscoring its urgency to cushion the bitter impact of the eurozone debt crisis on the local economy. Bank of Korea (BOK) Governor Kim Choong-soo and his fellow policymakers lowered the benchmark 7-day repo rate by a quarter percentage point to 3% for July. It marked the first rate cut since February 2009. The decision, which was not unanimous, came as a surprise to the market as many analysts had forecast a rate freeze this month, citing household debt problems and still-elevated inflation expectations. The BOK slashed the key rate by 3.25% to a record low of 2% between October 2008 and February 2009 to fight global financial turmoil, according to South Korea's (Yonhap) news agency. The bank raised it by five steps between July 2010 and June 2011 to curb inflationary pressure. The rate cut followed several central banks' recent moves to lower interest rates, indicating that the global economic outlooks are getting cloudy, hit by the eurozone debt crisis. The governor presented a bleaker economic outlook than the previous month, saying downside risks to growth are intensifying further. "The monetary policy committee hopes the rate cut will help the Korean economy return to a long-term growth trend," Kim told a press conference. "The output gap is expected to remain in negative territory for a considerable period of time ... Consumer inflation is expected to run below the central bank's median inflation target (of 3%) for the time being." Following the rate cut, bond futures shot up and the local currency extended its weakness to the dollar.