PiCK
Bank of Korea Holds Rate at 3.00% After Two Hikes, November Move in Focus
Summary
- The Bank of Korea’s Monetary Policy Board held the benchmark interest rate at 3.00%, with market attention now focused on whether it will deliver an additional hike next month.
- Consumer-price growth remains above the BOK’s inflation target, while rising home prices and an increase in household loans are variables for financial stability.
- A stronger won and a rise in the interest burden for households and businesses if the benchmark rate increases are being cited as reasons for caution on further tightening.
Forecast Trend Report by Period
The Bank of Korea kept its benchmark interest rate unchanged at 3.00%. After back-to-back increases in July and August, market attention is shifting to whether it will raise rates again next month.
The BOK’s Monetary Policy Board left the key rate unchanged at its monetary policy meeting on Oct. 22. The central bank resumed rate increases in July and followed with another hike in August, but opted to hold steady at this meeting.
Inflation remains above target. Consumer prices rose 2.9% in September, above the BOK’s 2% inflation target. With oil prices staying high because of the war in the Middle East, inflation is forecast to post an increase of around 3% again this month.
Exports and growth are also variables for the next rate decision. South Korea’s current-account surplus totaled $27.92 billion in the January-August period, about four times the level recorded a year earlier. In August, the BOK raised its 2026 growth forecast to 3.3% from 2.6%. Rising home prices in some parts of the Seoul metropolitan area and a renewed increase this month in household loans at major banks are also being watched from a financial-stability perspective.
By contrast, a stronger won and the burden of higher borrowing costs are cited as reasons for caution on further tightening. The won-dollar exchange rate fell as low as 1,322.8 won per dollar during trading on Oct. 21. The BOK estimates that a 0.25 percentage-point increase in the benchmark rate would raise interest costs by about $2.4 billion for households and about $2.6 billion for companies.
The Monetary Policy Board’s final meeting of the year will be held on Nov. 26. Before that, the advance reading for third-quarter real gross domestic product will be released on Oct. 27, and October consumer-price data will be published on Nov. 2. BOK Governor Shin Hyun-song is scheduled to explain the background to the rate decision and the policy outlook at a press briefing at 11:10 a.m. on Oct. 22.
