Seoul:The Bank of Korea (BOK) decided to keep its benchmark interest rate unchanged at 3 percent during its latest rate-setting meeting. This decision follows two consecutive rate hikes aimed at controlling accelerating inflation amidst ongoing Middle East tensions and robust export performance.
According to Yonhap News Agency, the BOK's Monetary Policy Board's decision to hold the rate steady was anticipated by many. The board cited the need to evaluate both domestic and external risk factors and the impact of prior rate hikes while maintaining the current base rate. This approach comes in light of uncertainties surrounding the Middle East conflict and fiscal policies in major economies.
The BOK had previously increased the benchmark rate in July and August as a preventive measure against mounting inflationary pressures. These back-to-back hikes were the first since January 2023, marking a series of seven consecutive increases beginning in April 2022. Concerns about the financial burden on lower-income households led to the recent pause in the tightening cycle.
The BOK has indicated that it will continue to adopt a hawkish stance due to ongoing inflationary pressures from rising oil prices and uncertainty in the Middle East. Consumer prices have remained around the 3 percent level in recent months and are expected to persist at this level in October.
BOK Governor Shin Hyun-song has expressed the central bank's commitment to tightening monetary policy until inflation aligns with the 2 percent target. The economy's positive growth trajectory, with a 1.8 percent expansion in the first quarter and 0.6 percent in the second quarter, supports this stance.
The BOK has raised its growth forecast for 2026 to 3.3 percent, up from 2.6 percent in August, driven by strong semiconductor exports and demand for AI infrastructure. The central bank expects sustained high growth in exports and investment, along with a gradual recovery in consumption supported by better income conditions.
Market experts anticipate another rate hike at the BOK's next policy meeting on November 26, as the bank continues to monitor inflation, the domestic economy, and financial stability to determine future rate adjustments.