Bank of Korea Gov. Rhee Chang-yong bangs the gavel at a rate-setting meeting held Thursday . (Joint Press Corps.)
South Korea’s central bank kept its benchmark interest rate unchanged at 2.5 percent on Thursday, citing the won’s rapid depreciation as a key risk factor.
The Bank of Korea said the weakening won was the main reason for extending its rate freeze, in place since May. A rate cut now would widen the rate gap with the US Federal Reserve, potentially triggering capital outflows and adding further downward pressure on the currency.
The won closed at 1,477.1 per dollar on Monday, its weakest level since April.
With the currency sliding to a seven-month low, Korea’s foreign exchange authorities — including the BOK, the Finance Ministry, the National Pension Service and the Health Ministry, which supervises the fund — held their first four-way meeting Monday to address the need to stabilize the won. Finance Minister Koo Yun-cheol followed with a press briefing Wednesday stressing the urgency of containing foreign exchange volatility.
The BOK also highlighted risks in the overheating housing market and rising household debt.
Separately, the central bank raised its economic growth outlook for 2025 to 1 percent, up 0.1 percentage point from its previous forecast, citing strong exports and resilient domestic consumption.
With Thursday’s decision marking the BOK’s final rate meeting of the year, markets will now turn their attention to the US Federal Reserve’s Federal Open Market Committee meeting scheduled for Dec. 9-10.
silverstar@heraldcorp.com