(2nd LD) BOK holds key rate steady at 3 pct after 2 consecutive rate hikes

The Bank of Korea (BOK) maintained its key interest rate at 3 percent on Thursday, following two consecutive hikes aimed at curbing inflation, despite rising Middle East tensions and robust exports. The Monetary Policy Board decided to keep the rate unchanged in its latest meeting, citing the need to assess various risk factors while maintaining the base rate.

This decision marks the first time in over a year that the BOK has decided to hold rates steady, after raising them twice in July and August 2023. The board's decision comes amid concerns that higher borrowing costs could burden lower-income households, as well as uncertainties surrounding global monetary and fiscal policies. Despite the rate freeze, the BOK maintains a hawkish stance, signaling that further hikes may be necessary to bring inflation back to its 2 percent target.

Consumer prices have remained around the 3 percent level in recent months, buoyed by rising oil prices linked to Middle East conflicts. The BOK expects solid economic growth to continue, with the country's economy expanding 1.8 percent in the first quarter and 0.6 percent in the second quarter alone. The central bank has also raised its 2026 growth forecast to 3.3 percent from 2.6 percent in August, driven by strong semiconductor exports and AI infrastructure demand.

Moving forward, the BOK expects exports and investment to sustain high growth, while consumption is expected to gradually accelerate as incomes improve. The central bank will reassess the timing and pace of future rate hikes based on developments in inflation, the domestic economy, and financial stability.