SEOUL, May 29, 2025 (BSS/AFP) - South Korea's central bank cut interest rates Thursday in a bid to cushion the export-dependent economy from US President Donald Trump's tariff war, as it almost halved its annual growth forecast.

The Bank of Korea lowered its benchmark interest rate "from the current 2.75 per cent to 2.5 percent" and said it predicted the economy to expand 0.8 percent this year, down from the 1.5 percent projected in February.

Asia's fourth-largest economy grew less than expected in the first three months of the year as the export giant and semiconductor powerhouse reeled from political chaos at home and heightened trade tensions.

The rate cut, which was flagged in April by bank governor Rhee Chang-yong, takes borrowing costs to their lowest level since October 2022.

"All six members of the Monetary Policy Board, excluding the governor, expressed the view that the door should be left open to a possible rate cut within the next three months," Rhee said last month.

"Given what we've seen so far from the Trump administration's tariff policy, including reciprocal tariffs, China-specific tariffs, itemised duties, and a baseline 10 percent rate, the growth outlook scenario released in February now appears overly optimistic," he added.

The export-driven country has also been hit hard by the 25 percent tariffs on automobiles imposed by Trump in early April.