SEOUL, South Korea (AP) — South Korea’s central bank on Friday cut its policy rate for the first time in more than four years as pressure to revive a sluggish economy outweighed concerns about the country’s level of household debt.
The Bank of Korea lowered its key interest rate by a quarter percentage point to 3.25% following a meeting of its monetary policy committee, in its first move to lower borrowing costs since May 2020, when the economy was weathering the COVID-19 pandemic.
The bank raised the rate by a quarter percentage point in August 2021 over concerns about inflation and soaring household debt, driven in part by skyrocketing house prices, and then froze rates for over three years.
The bank said in a statement that domestic demand is making a slow recovery, bogging down the pace of economic growth. It said there was room for a rate cut because inflation is showing signs of stabilizing and household debt is also increasing more slowly as the housing market in the greater Seoul area cools down.
At a news conference, central bank Governor Rhee Chang-yong said there’s still capacity in the economy for additional cuts, pointing out that house prices in the capital area grew by two thirds less in September than in August. The country’s consumer price inflation also eased to 1.6% in September, below the policy target of 2%.
However, Rhee said it’s still too soon to conclude that the country’s financial situation is stabilizing and indicated that the bank would be conservative about further rate cuts.
“We will decide after monitoring the stability in financial markets,” said Lee. He said the bank’s latest step could be interpreted as a “hawkish cut,” meaning that it still favors tighter monetary conditions.
Alarmed by slowing growth, government officials have called for the bank to lower borrowing costs. During a parliamentary hearing, South Korean finance minister Choi Sang-mok told lawmakers that he “respects and welcomes” the rate cut.
South Korea’s trade-dependent economy is facing increasing uncertainties, including the growing crisis in the Middle East that could potentially influence fuel prices, exchange rates and public utility prices, the bank said.
“The future path of economic growth is likely to be influenced by the pace of recovery in domestic demand, economic conditions in major countries and trends in information-technology exports,” the bank said.
“The growth in house prices in the metropolitan area and household debt is expected to gradually slow down due to the strengthening of macroprudential policies,” aimed at maintaining the stability of the financial system, the bank said.
“However, there’s still a need to monitor related risks, such as the impact the lowered base interest rate may have on household debt.”
The bank projects South Korea’s economy to grow at 2.4% this year, down from 2.6% in 2023.
Household loans issued by banks were measured at around 1,135.7 trillion won ($841 billion) at the end of September after growing by about 5.7% during the month, compared to a 9.2% increase in August. While the country’s exports have been gradually improving, job growth remains sluggish, due to weakness in construction industries and other sectors, the bank said.
The headline of this story has been edited to reflect that the central bank cut, not raised, its policy interest rate.
A sign for Bank of Korea is seen at its headquarters building in Seoul, South Korea, Friday, Oct. 11, 2024. (AP Photo/Ahn Young-joon)
A woman passes by an advertisement for deposit interest rates at a bank in Seoul, South Korea, Friday, Oct. 11, 2024. (AP Photo/Ahn Young-joon)
Bank of Korea Gov. Rhee Chang-yong speaks during a press conference at the central bank in Seoul, South Korea, Friday, Oct. 11, 2024.(AP Photo/Ahn Young-joon)
Bank of Korea Gov. Rhee Chang-yong speaks during a press conference at the central bank in Seoul, South Korea, Friday, Oct. 11, 2024. (AP Photo/Ahn Young-joon)
TOKYO (AP) — Toyota is returning to Formula 1 after 15 years as the Japanese automaker becomes a “technical partner” of American racing team Haas.
There will be Toyota branding on the Haas cars starting from next week's United States Grand Prix in Austin, Texas, and the auto giant's racing division will provide “design, technical and manufacturing services” to the North Carolina-based team.
This doesn't mean a return of the Toyota works team which raced in F1 for eight seasons until 2009, however.
Toyota Chairman Akio Toyoda, speaking Friday, suggested he had second thoughts about pulling out of F1. But not for obvious reasons.
“I think that, somewhere deep in his heart, that ordinary older car-loving guy Akio Toyoda had always regretted having blocked — by pulling out of F1 — Japanese youths' path toward driving the world's fastest cars,” he said.
And then he added: “That said, with the media watching my every step, I dare to add that I still believe my decision as the president of Toyota to withdraw from F1 was not wrong.”
Haas will still race under its own name and Toyota isn't going to be supplying engines like it did for other teams in the 2000s.
Haas already has an agreement to use Ferrari engines through 2028 as part of an existing partnership which dates to Haas' first F1 season in 2016. Haas previously extended its Ferrari deal in July to cover the new F1 regulations coming in 2026.
The deal extends Haas' strategy of relying on outside partners for much of the work that other F1 teams do in-house. Since its 2016 debut, the U.S. team has worked closely with Ferrari — even basing its design office in Ferrari's hometown of Maranello, Italy — and relies on Italian race-car builder Dallara to construct its cars.
Haas is clear it isn't trying to replace Ferrari with Toyota. Haas team principal Ayao Komatsu said he talked with his Ferrari counterpart Fred Vasseur “from the very early stages of this idea of collaboration” with Toyota.
Toyota is looking to develop future F1 drivers, though Haas doesn't have a spare seat for next year.
The head of Toyota's Gazoo racing division, Tomoya Takahashi, said in a statement Friday that Toyota would aim to “cultivate drivers, engineers, and mechanics” in its partnership with Haas. The team has already signed Ferrari reserve Oliver Bearman and the experienced Esteban Ocon, who's currently at Alpine, as its drivers for 2025.
“Some might jump to the conclusion: Toyota is back in F1. But that's not the case,” Takahashi said. “Through this partnership we believe it would be fantastic if we could develop drivers who can secure regular seats in F1 in the future.”
One Toyota driver, Ryo Hirakawa, is a reserve at McLaren this year. Komatsu said Toyota drivers would initially be given time testing older F1 cars at Haas. Toyota could also provide engineers to fill gaps at Haas, which has a relatively small staff by F1 standards.
Toyota spent lavishly when it joined F1 in 2002 as it attempted to build a title-winning team, but never won a race despite several near-misses.
Toyota made a sudden announcement at the end of the 2009 season that it was leaving F1 as part of a cost-cutting program even though it had almost finished designing its car for the following season.
Since then, Toyota has focused on other forms of auto racing like NASCAR, the Le Mans 24-hour race — where it has a rivalry with Ferrari — and rallying.
The Toyota-Haas F1 announcement Friday came just over a week after the company was among three big Japanese firms which pulled sponsorship money out of the Olympics.
Haas is seventh of 10 teams in this year’s F1 constructors’ championship standings.
Ellingworth reported from Duesseldorf, Germany. Yuri Kageyama in Tokyo contributed.
AP auto racing: https://apnews.com/hub/auto-racing
Toyota Chairman Aiko Toyoda, center, with Ayao Komatsu, left, Team Principal of MoneyGram Haas F1 Team and Tomoya Takahashi, President of GAZOO Racing Company, poses for a photo in Oyama, Shizuoka prefecture, Japan, Friday, Oct. 11, 2024. (Kyodo News via AP)
In this photo provided by Toyota Motor Corporation, Toyota Chairman Aiko Toyoda, center, with Ayao Komatsu, left, Team Principal of MoneyGram Haas F1 Team and Tomoya Takahashi, President of GAZOO Racing Company, poses for a photo in Oyama, Shizuoka prefecture, Japan, Friday, Oct. 11, 2024.(Toyota Motor Corporation via AP)
FILE - Toyota Motor Corp. Chief Executive Akio Toyoda delivers a speech on the stage at the Tokyo Auto Salon, an industry event similar to the world's auto shows on Jan. 13, 2023, in Chiba near Tokyo. (AP Photo/Eugene Hoshiko, File)
