South Korea's Central Bank Slashes Key Interest Rate

South Korea's central bank slashed its key interest rate Monday for the second time this month in a bid to boost the economy and stock market amid the global financial crisis.

The Bank of Korea said it lowered its benchmark seven-day repurchase rate from 5 percent to 4.25 percent at a meeting Monday.

The decision came as South Korean markets suffer due to the world financial turmoil. The country's benchmark stock index lost one-fifth of its value last week, its worst weekly performance on record. The won currency has also fallen sharply.

The Korea Composite Stock Price Index, which had fallen in early trading, rose as much as 2.9 percent after the decision was announced.

Monday's decision came at a rare interim policy meeting and follows a cut of a quarter percentage point at a regular policy meeting earlier this month.

It was the second such unscheduled meeting for the bank since its current policy was established in 1998. The previous one came after the Sept. 11, 2001 terror attacks in the United States when the bank cut its key rate by half a percentage point.

The bank announced Friday that South Korean economic growth slowed in the third quarter to 3.9 percent, as construction contracted and the global slowdown hit manufacturing and exports. It was the worst performance by Asia's fourth-largest economy since the second quarter of 2005, when it expanded 3.4 percent.

The slowdown comes as the global financial crisis sends shock waves through world markets and threatens to drag major economies into recession.

On Friday, South Korea's benchmark stock index plunged 10.6 percent to close below 1,000 points for the first time in more than three years. The drop pushed the Kospi to its worst weekly fall — 20.5 percent — since records began being kept in 1987.

President Lee Myung-bak held an emergency meeting Sunday at which he instructed top economic officials to back a government plan to increase public spending and reduce taxes to stimulate the economy, according to his spokesman, Lee Dong-kwan.

The president returned home Saturday from China, where he discussed ways to deal with the global financial meltdown with Asian and European leaders.

Senior presidential secretary Bahk Byong-won told reporters that South Korea would announce a set of comprehensive measures to revive the economy within one week.

Lee was giving a speech Monday on the financial crisis in the National Assembly.