South Korea's central bank cuts rates in a bid to boost the economy

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South Korea's central bank cuts rates in a bid to boost the economy

2024-10-11 16:47 Last Updated At：16:50

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.

Indonesians mark 2 decades since the tragic tsunami that killed hundreds of thousands

2024-12-21 11:49 Last Updated At：11:51

BANDA ACEH, Indonesia (AP) — Two decades after a catastrophic tsunami destroyed her village, Tria Asnani still cries when she recalls how she lost her mother while trying to escape the giant waves.

Asnani, now a school teacher, was only 17 at the time. Her father, who was a fisherman, never returned home from sea. She doesn't know how she survived. “I cannot swim. I could only rely on dhikr (Islamic prayer).”

On Dec. 26, 2004, a powerful 9.1-magnitude earthquake off the coast of the Indonesian island of Sumatra triggered a tsunami that killed around 230,000 people across a dozen countries, reaching as far as East Africa.

But Indonesia’s Aceh province, located closest to the earthquake’s epicenter and with 18 of 23 districts and cities located in the coastal line in the Northern side of Sumatra, bore the brunt of the disaster with more than half of the total death toll reported.

The worst-hit areas were in Aceh Besar and Banda Aceh, according to the Aceh Disaster Management Agency.

Asnani's Lampuuk village lies in a fishermen’s community in Aceh Besar, known for its white sandy beaches and turquoise waters. However, on that day, it was among the hardest hit, with waves more than 30 meters (98 feet) high which changed the coastline in Aceh and led to land subsidence after the earthquake.

Buildings by the coast were flattened to the ground except for Rahmatullah Mosque, 500 meters (1,600 feet) from the shore, and about 1 kilometer (0.6 miles) from Asnani’s house. The photo of the place of worship, left pretty much unscathed, later became iconic.

After the disastrous event, thousands, including Asnani, had to relocate to start afresh. She moved with her uncle to another region in Aceh to continue her studies. After she got married, she returned in 2007 to her parents' house which was rebuilt with assistance from the Turkish government and lived there for 10 years.

Many international donors and organizations poured in money to help rebuild the affected areas that lost schools, hospitals and basic infrastructure, made stronger than before the tsunami hit.

Tsunami and Disaster Mitigation Research Center at Syiah Kuala University in Aceh recorded more than 1,400 wrecked schools and about 150,000 students had their education process disrupted by the destructive waves in a report published in 2019.

Three “escape buildings” were also constructed in a relatively safer area to accommodate thousands of people if an earthquake and tsunami strike.

Across the province, memories of the tsunami can be felt almost everywhere.

The Aceh Tsunami Museum in Banda Aceh houses photos of the aftermath and vehicle debris, serving as a constant reminder of what was lost that day. Local authorities have also turned a former floating diesel-powered power plant barge that washed about 6 kilometers (about 4 miles) inland by the tsunami into another memorial place.

Both places have become the most popular tourist destinations in the area.

But development never stops and 20 years after the tsunami the Aceh coast is brimming with residential housing, cafes and restaurants, as well as tourism support facilities, while the hills in some areas from which people are currently being mined for sand and stone.

Fazli, the head of Preparedness in Aceh Disaster Management Agency, said that the government initially stipulated that there should be no activity up to 1 kilometer (0.6 miles) from the coast. Over time, many displaced fishermen returned to their original coastal homes, drawn by their livelihoods and ties to the sea, despite having received housing elsewhere.

He also said the agency has “provided the Acehnese people with information ” to deal with a potential tsunami. "People already know what to do,” said Fazli, who, like other Indonesians, uses a single name.

Siti Ikramatoun, a sociologist in Banda Aceh, said that despite years of recovery and rebuilding, the people of Aceh must stay vigilant.

“If people experienced (the tsunami), they may have an instinct to anticipate it. But those who do not have the experience, they won’t get what to do,” Ikramatoun said.

Various communities in Aceh commemorate the tsunami yearly along with the government and local authorities.

In Banda Aceh, art communities in early December spread disaster awareness through theatrical or musical performances that can be easier for people to follow and target all groups, including those born after the tsunami.

Muslina, 43, a civil servant, took her youngest son to the Aceh Tsunami Museum to watch one of the shows. She lost relatives and loved ones 20 years ago and she wants to make sure she always remembers them.

“Earlier my son asked me if there might be another tsunami when he grows up," she said. “I told him I do not know. Only God knows, but if there is a strong earthquake and the seawater recedes, we run, run, run to find higher ground.”