Seoul: South Korea’s central bank maintained its benchmark interest rate on Thursday, aiming to stabilize the local currency in light of uncertainties surrounding the United States’ extensive tariff policies. The monetary policy committee of the Bank of Korea (BOK) decided to keep its key rate unchanged at 2.75 percent during a rate-setting meeting in Seoul.
According to Yonhap News Agency, this decision comes after a quarter-percentage-point rate cut in February, marking the third reduction since October 2024 when the BOK initiated its monetary easing cycle for the first time since August 2021. The decision highlights the BOK’s priority on financial stability, balancing the need to support economic growth and secure markets.
The financial and foreign exchange markets have recently become more volatile, primarily due to the unpredictable tariff policies of the Donald Trump administration. Earlier this month, the local currency dropped to a 16-year low of 1,484.1 won against the U.S. dollar after the U.S. announced “reciprocal” tariffs, including a 25 percent tariff for South Korea and a 10 percent baseline tariff on foreign imports.
In a notable policy adjustment, the U.S. president declared a 90-day suspension in the implementation of the reciprocal tariffs shortly after their enactment, leading to a slight strengthening of the Korean won to a yearly high of the 1,420 won level in recent sessions.
The current interest rate gap between South Korea and the U.S. is up to 1.75 percentage points. Experts indicate that a further widening of this gap could result in additional depreciation of the Korean currency. The BOK seems to have chosen to maintain policy space by holding its rate steady, as South Korea prepares for tariff negotiations with Washington.
President Trump has directed his administration to initiate immediate tariff discussions with South Korea and other key partners. Finance Minister Choi Sang-mok is set to meet U.S. Treasury Secretary Scott Bessent next week for talks on tariffs and other trade issues. The Korean won opened at 1,416.0 won on Thursday, an increase of 10.7 won from the previous session.