South Korea's Central Bank Pauses Key Rate Amid Debt, Citing Persistent Uncertainties
(MENAFN) South Korea's central bank, the Bank of Korea (BOK), announced on Thursday it would maintain its benchmark interest rate at 2.75 percent, citing persistent uncertainties including significant household debt and the weakening of the local currency against the U.S. dollar.
The decision by Governor Rhee Chang-yong and the monetary policy board aligns with widespread market expectations, with a Korea Financial Investment Association survey indicating 88 percent of fixed-income experts anticipated the rate freeze.
Despite holding the rate, all six monetary policymakers indicated the potential for an additional rate cut within the next three months. The BOK previously lowered the key rate by 0.25 percentage points in February, following two prior cuts of the same magnitude in October and November of the previous year, driven by a pessimistic outlook for South Korea's economic growth. The central bank in February revised its 2025 growth forecast for the Asian economy downwards by 0.4 percentage points to 1.5 percent.
The BOK acknowledged increasing downward pressure on the economy due to lackluster economic activity in the first quarter and worsening global trade conditions. While the imposition of US tariffs has added to economic headwinds, the persistently weak local currency has reportedly deterred the central bank from implementing further rate reductions.
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