Aug 14, 4:22 AM EDT

S. Korea cuts key rate for 1st time in 15 months

AP Photo
AP Photo/Ahn Young-joon
World Video

Buy AP Photo Reprints
Swift negotiations free U.S. journalists
Timeline of U.S.-North Korea relations
Timeline of North Korea's nuclear and missile programs
Depth of Field: North Korea
A look at Kim Jong Il
Truth emerges about Kim Soo-im
Commission: U.S. military killed Korean refugees
South Koreans Protest U.S. Beef Accord
S. Korea Women Keep Diving Tradition Alive
Bittersweet Homecoming: Koreans Return Home After 68 Years in Russia
Latest News
North Korea insults John Kerry over his looks

Ex-NFL lineman tops bill for Pyongyang fight night

Pope leaves South Korea after urging peace

Elderly ex-sex slaves want solace, help from pope

A look ahead at pope's final day in South Korea

A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
Some Bank of England board members seek rate hike

Irish bonds yields hit record low after upgrade

HK economy slows as China tourists spend less

Eurozone recovery grinds to halt amid Ukraine fear

S. Korea cuts key rate for 1st time in 15 months

French economy stagnates in 2nd quarter

Germany's economy losing momentum

Greek economy contracts at slowest rate since 2008

US retail sales flat in July

Japan's economy shrinks as tax hike hits spending

Greece's Debt Threatens to Spread
State budget
gaps map
Auto industry problems trickle down, punish Tennessee county
Women give old Derby hats a makeover in tough economy
S.C. town deals with highest unemployment in South
How mortgages were bundled and sold as securities
Tracking the $700 billion financial bailout
Tracking the year's job losses
State-by-state foreclosures since 2007
Credit crisis explained
Presidents and their economic legacies
Lexicon of the financial crisis
Americans' addiction to debt

SEOUL, South Korea (AP) -- South Korea's central bank cut its key interest rate for the first time in 15 months on Thursday, providing support to an economy dragged down by the shock of a ferry sinking that killed hundreds of teenagers.

The Bank of Korea lowered its policy rate by a quarter percentage point to 2.25 percent. The bank had kept it unchanged since a rate cut in May 2013.

Most analysts had predicted the bank would lower borrowing costs to boost consumer sentiment.

The sinking in April of the Sewol ferry killed 294 people and left 10 missing, mostly teenagers on a school trip, causing a national outpouring of grief. Consumer spending shrank in the April-June quarter, hitting its lowest in nearly three years.

In a statement, the central bank said South Korea's exports continued to pick up but recent improvement in consumer spending was "insufficient." Investment by companies was also weak, it said.

Last month, Bank of Korea and the Finance Ministry lowered their growth outlooks for Asia's fourth-largest economy. According to the central bank, South Korea's economy will likely expand 3.8 percent this year instead of 4.0 percent while the finance ministry predicted 3.7 percent growth, revised down from the previous forecast of 3.9 percent.

To encourage spending by consumers and companies, South Korea's new finance minister unveiled last month stimulus plans that included easing mortgage rules to stimulate the housing market. The government also announced a new tax policy to encourage companies to pay more dividends to investors and raise wages.

Low inflation has given the central bank scope to cut interest rates. It said it would continue to give support to the recovery in coming months.

© 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.