Investing.com-- The Bank of Korea cut interest rates as expected on Tuesday, as some clearing political turmoil in the country granted the central bank enough headroom to resume its easing cycle.

The BOK cut its benchmark rate by 25 basis points to 2.75%, in line with market expectations. The cut is the BOK’s third such move since it kicked off an easing cycle in late-2024.

Markets had largely anticipated the cut, given that the BOK provided a dovish outlook on rates amid cooling inflation, softening economic growth and weak business activity in South Korea. 

The central bank had unexpectedly kept rates steady in January amid heightened political tensions in the country, after a failed attempt to impose martial law by President Yoon Suk Yeol.

But these tensions now appeared to have eased, after Yeol was impeached, arrested, and put on trial over his actions. 

South Korea’s economy is heavily dependent on technology exports- which have weakened in recent years, despite some support from artificial intelligence demand.

This has translated into weaker overall economic conditions in the country, necessitating more rate cuts from the BOK. South Korea also faces headwinds from increased U.S. trade tariffs under President Donald Trump.