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Bank of Korea cuts key interest rate to 4 percent

Bank of Korea cuts key interest rate to 4 percent

South Korea's central bank cut its key interest rate Friday for the third time in less than a month, stepping up efforts to stave off a sharp slowdown in an economy pummeled by the global financial crisis.
The Bank of Korea announced during a regular policy meeting that it had lowered its benchmark seven-day repurchase rate to 4 percent from 4.25 percent.
The move followed hefty interest rate cuts overnight in Europe. The Bank of England slashed its key rate by 1.5 percentage points and the European Central Bank eased half a percentage point.
"The domestic economic slowdown persists," the South Korean central bank's monetary policy committee said in a statement, which also highlighted instability in stocks and the difficulties companies are having raising funds because of tight credit conditions.
The committee also suggested the rate could be lowered further, saying it "will do what is needed to ward off the risk of a severe slowdown in economic activity brought about mainly by the financial market unrest."
South Korea's benchmark stock index pared losses after a sharp early decline as did the South Korean won.
The Korea Composite Stock Price Index was down 0.95 point, or 0.1 percent, to 1,091.27 in early afternoon trading after falling as much as 4.9 percent.
The won traded at 1,334 to the greenback, down 0.2 percent, after opening 2.5 percent lower.
The widely expected cut follows one of a quarter percentage point on Oct. 9 and another of three quarters of a percentage point on Oct. 27 _ the biggest ever _ at an emergency meeting.
The rate was last at 4 percent in June of 2006.
In addition to the rate cuts, South Korean financial authorities have taken various steps to boost the economy.
The government announced last month a $100 billion plan to guarantee overseas loans taken out by the country's banks.
In New York on Thursday, the Dow Jones industrial average fell 443.48, or 4.9 percent, to 8,695.79 amid concerns about widespread economic weakness.
The losses, combined with a steep decline Wednesday, represent the Dow's worst two-day percentage decline since the October 1987 crash.
The Kospi has declined 42 percent so far this year as foreign investors have fled South Korean stocks. The outbreak of the global financial crisis accelerated losses at one point to over 50 percent.
A series of policy measures by the South Korean government and recent gains on Wall Street, however, had helped stabilize local stocks. The Kospi had risen for five straight sessions through Wednesday.
The won, which has also fallen sharply this year as stocks have dropped, is down 30 percent so far in 2008.
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APTN producer Hyun-ah Kim and APTN cameraman Yong-ho Kim contributed to this report.