The Bank of Korea held its benchmark interest rate at 3.00% on Thursday, pausing after back-to-back hikes in July and August, but kept a hawkish stance that leaves the door open to further tightening. The seven-member monetary policy board’s decision was forecast by all 34 analysts surveyed by Reuters.
The central bank upgraded its economic growth forecasts and said both headline and core inflation for next year will exceed previous estimates, while remaining upbeat about the country’s chip-driven export momentum. “The growth rates for this year and next year are expected to be considerably higher than the August forecasts of 3.3% and 2.9%, respectively,” the BOK said in a statement.
Shin keeps markets guessing
Governor Shin Hyun Song declined to endorse market expectations for the terminal rate. “I don’t believe it is necessary to strictly follow that path,” he told a news conference, adding that the bank would “refine our own thinking and continue to conduct monetary policy with an open mind.” The July and August increases were the bank’s first consecutive hikes in more than three years.
Headline consumer inflation slowed to 2.9% in September from 3.1% in August, still above the bank’s 2% target. Analyst consensus puts the peak policy rate at 3.50%, pricing in one more hike this November and another in the first quarter of 2027. Capital Economics’ Gareth Leather said he has “penciled in one hike for the BOK’s final meeting of the year in November.”
Asia’s rate divergence
The decision highlights how Asian central banks are diverging: while the BOK pauses to assess lagging effects of its tightening, markets are betting the Bank of Japan could hike as soon as December. The won was muted at 1324 after the decision.
The hold comes six days before the Fed’s own October 28 decision, where US policymakers are likewise expected to keep rates steady.
Markets took the hold in stride: the Korean won was muted at 1324 after the decision, and analysts quickly turned to the November meeting. The July and August increases were the central bank’s first consecutive hikes in more than three years, and Governor Shin has repeatedly said policy will stay restrictive until inflation converges to the 2% target. With chip-driven exports strong and growth forecasts rising, most economists see the pause as a breather — not the end of the tightening cycle.
