SEOUL, South Korea — South Korea’s central bank on Friday cut its benchmark interest rate for the first time in more than four years, as pressure to revive a sluggish economy outweighed concerns about government debt levels. households in the country.

The Bank of Korea cut its key interest rate by a quarter of a percentage point to 3.25 percent following a meeting of its monetary policy committee, in its first measure to reduce borrowing costs since May 2020, when the economy was dealing with the COVID-19 pandemic.

The bank raised the interest rate by a quarter of a percentage point in August 2021 due to concerns about inflation and soaring household debt, driven in part by soaring housing prices. real estate, then froze rates for more than three years.

The bank said in a statement that domestic demand was slowly recovering, slowing the pace of economic growth. He added that there is room to cut rates as inflation shows signs of stabilizing and household debt is also rising more slowly as the property market in the greater Seoul area cools.

South Korea’s trade-dependent economy faces growing uncertainties, including the growing crisis in the Middle East that could potentially influence fuel prices, exchange rates and utility prices, the bank said .

“The future trajectory of economic growth will likely be influenced by the pace of domestic demand recovery, economic conditions in major countries and trends in information technology exports,” the bank said.

“The growth of real estate 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, it remains necessary to monitor the associated risks, such as the impact that the reduction in the base interest rate could have on household debt.”

The bank forecasts that South Korea’s economy will grow 2.4% this year, up from 2.6% in 2023.