Bank of Korea holds rates; upbeat outlook points to future hikes
The central bank keeps base rate unchanged at 3%, as expected; it says further tightening remains on the table
The Bank of Korea (BOK) left its key interest rate unchanged at 3% on Thursday, despite upgrading its economic growth predictions and maintaining a cautious tone. All 34 surveyed analysts had anticipated a rate hold, reflecting the consensus. The central bank emphasized that further rate hikes remain a possibility, depending on the assessment of inflation, financial stability, and domestic economic trends.
BOK Governor Shin Hyun-song stated that the bank would refine its policy approach as new data arrives, rather than rigidly following market expectations. While analysts predict a terminal rate of 3.50% with potential hikes in November and Q1 2027, Shin highlighted the need for a measured pace of tightening after consecutive hikes in July and August.
The BOK's July and August hikes marked the first consecutive rate increases in over three years, aimed at bringing inflation closer to the central bank's 2% target. Nevertheless, Shin reiterated that policy would remain restrictive until inflation aligns with the target. The current market consensus anticipates the US Federal Reserve to maintain rates at 4% following a September 25-basis-point increase, with the Fed expected to hold rates steady at its October meeting before implementing a final hike in December.
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