Bank of Korea Holds Rates at 3.00% While Signaling Future Hikes Amid Strong Export Growth
The Bank of Korea maintains its benchmark interest rate at 3.00% while signaling future hikes, citing robust export momentum and rising growth forecasts.
POLICY WIRE — Seoul, South Korea — The Bank of Korea opted to keep its benchmark seven-day repurchase rate steady at 3.00% on Thursday. This decision, which aligned with the expectations of all 34 analysts surveyed by Reuters, follows consecutive rate increases implemented in July and August.
Despite the pause, the central bank’s seven-member monetary policy board maintained a hawkish outlook. Officials indicated that further tightening remains a possibility, noting that the institution will determine the pace and timing of future adjustments based on domestic economic trends, financial stability, and inflation data.
The bank significantly upgraded its economic growth projections, stating that figures for both this year and next will likely exceed the 3.3% and 2.9% forecasts issued in August. Additionally, the BOK noted that both headline and core inflation for the coming year are expected to surpass previous estimates.
BOK Governor Shin Hyun Song emphasized that the bank would not strictly adhere to market consensus regarding terminal interest rates. During a news conference, Shin stated, I do not believe it is necessary to strictly follow that path, adding that the bank intends to refine its strategy based on incoming data with an open mind.
Market analysts currently anticipate a peak policy rate of 3.50%, with expectations for additional hikes in November and the first quarter of 2027. Paik Yoon-min of Kyobo Securities noted that while the bank may deviate from specific timelines, failing to hike in November could pose risks to the bank’s inflation-control mandate.
The central bank is currently balancing these domestic pressures against external risks and the lingering effects of its recent tightening cycle. Meanwhile, South Korea’s export sector continues to thrive, driven by global demand for artificial intelligence, with shipments from January through September exceeding $800 billion for the first time.
Reporting by Policy-Wire (PW)
