Bank of Korea holds benchmark rate at 3% after two consecutive hikes

The Bank of Korea's Monetary Policy Board held the benchmark interest rate steady at 3 percent.

The board convened Thursday morning to decide on monetary policy direction and kept the benchmark rate at its current annual level of 3 percent. Governor Shin appeared at the meeting wearing a Bank of Korea necktie for the first time — a yellow tie featuring a calligraphic rendering of the institution's initials, forgoing the red and blue colors typically associated with rate hikes and cuts.

The Bank of Korea officially entered a rate-hike cycle when it raised rates for the first time in about three and a half years at its July 16 monetary policy meeting. Since then, however, growing economic uncertainty appears to have led the board to conclude that back-to-back hikes would be premature.

The central bank had entered an easing cycle in October 2024, cutting rates consecutively in November last year and in February and May this year, before holding them steady eight times after May. It then shifted back into a tightening cycle in July.

Thursday's decision to hold appears to reflect greater weight placed on consumer prices that have fallen back to the 2 percent range, a stabilizing won-dollar exchange rate, and uncertainty surrounding US monetary policy — even as inflation remains elevated and economic growth continues.