Financial assistance is pending, South Korea's central bank may resume interest rate cuts.

The Bank of Korea will announce its interest rate decision on Tuesday. Economists generally expect the Bank of Korea to cut the benchmark interest rate by 25 basis points to 2.75% on Tuesday. It is widely expected that the Bank of Korea will enter a new easing cycle this week to support the South Korean economy against Donald Trump's trade war, in the absence of early fiscal stimulus measures. In January of this year, all six members of the Bank of Korea committee except Governor Lee Ju-yeol expressed openness to cutting interest rates in the next three months. Lee Ju-yeol did not disclose his view at that time. Since then, Lee Ju-yeol has called for fiscal stimulus measures to promote economic development, while expressing caution about the weakness of the South Korean won. Ashok Bhundia, an economist at the Institute of International Finance (IIF), said, "Supplemental budgeting is also key to addressing economic downside risks. If the South Korean government fails to pass a supplementary budget, further interest rate cuts may be necessary." Lee Ju-yeol recommended an additional budget of 15 trillion to 20 trillion Korean won, lower than the 35 trillion won proposed by the main opposition Democratic Party, which controls the South Korean National Assembly. The South Korean government is studying the details of the additional budget proposal. Political turmoil has led to a sharp depreciation of the South Korean won against the US dollar. After the Bank of Korea kept the interest rate unchanged at 3% last month, Lee Ju-yeol stated that the exchange rate trend would affect monetary policy. Following two rate cuts by the end of 2024, the Bank of Korea paused rate cuts, reflecting concerns that a third consecutive rate cut may put greater downward pressure on the won. South Korea is one of the countries most vulnerable to exchange rate fluctuations, as its energy, food, and economic growth depend on trade. Economists from Citibank, Jin-Wook Kim and Jiuk Choi, said that the additional 25% US tariffs will impact South Korea's automobile, pharmaceutical, and semiconductor industries, and they expect South Korea's GDP to suffer a 0.2% loss. They said, "In this situation, the indirect negative impact on the South Korean economy could be much greater." Surveys show that economists expect the Bank of Korea to cut interest rates three times, bringing the rate to 2.25% by the end of this year. A week ago, Lee Ju-yeol reiterated that the Bank of Korea is still in an easing cycle, while stating that the committee will consider various factors in determining the interest rate.