South Korea maintains key rate as won weakens
South Korea’s central bank on Thursday kept its benchmark interest rate unchanged, as a weakened won and rising inflation concerns limited room for further easing.
In a widely anticipated move, the Monetary Policy Board of the Bank of Korea (BOK) held the key rate at 2.5 percent during its rate-setting meeting in Seoul, marking the fifth consecutive pause since July, News.Az reports, citing Yonhap.
“Inflation is expected to gradually decline, though the elevated exchange rate remains a source of upside risk. Regarding financial stability, risks still remain related to housing prices in Seoul and its surrounding areas, household debt, and heightened exchange rate volatility,” the BOK said in a statement.
Thursday’s decision was unanimous, although one of the board’s six members emphasized keeping open the possibility of further rate reductions over the next three months, BOK Governor Rhee Chang-yong told a press briefing.
For the first time since entering an easing cycle in October 2024, the BOK removed references to a potential rate cut from its policy statement.
“Beyond the three-month time frame, uncertainty remains too high to make any definitive call,” Rhee said. “While some factors support economic growth, inflation remains sensitive to the exchange rate, and uncertainty over U.S. monetary policy is elevated. We will determine the policy path based on incoming data.”
The latest pause came amid a weakened won and heightened volatility in the foreign exchange market.
The won sank to the mid-1,480 won per U.S. dollar range late last month, nearing the lowest level in more than 16 years, but authorities' strong intervention and a series of policy measures had pushed it back to the 1,420 won level.
The currency, however, has reversed course since Dec. 30 and fallen against the greenback for 10 consecutive trading sessions through Wednesday to be quoted at 1,477.5 won, marking its longest losing streak since 2008, when the country was hit by the global financial crisis.
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