South Korea’s central bank is expected to keep interest rates unchanged at 3% on Thursday after two consecutive hikes, with analysts saying this does not signal a change in policy stance as inflation remains high.
Economists polled by Reuters expected the Bank of Korea to keep interest rates unchanged, a decision that came after President Lee Jae-myung reportedly called for “all-out efforts” to boost housing supply.
The Bank of Korea said in a statement that it chose to keep interest rates unchanged in order to assess the impact of the past two interest rate hikes and assess “trends in domestic and foreign risk factors,” citing the Middle East conflict and heightened uncertainty surrounding major countries’ monetary and fiscal policies.
Last week, Bank of Korea Governor Shin Hyun-sung told the IMF/World Bank annual meeting that the central bank would continue to maintain restraint in monetary policy until it was confident that inflation was on target. “Inflation is really accelerating, both from cost push and demand pull,” Singh said.
The inflation rate in Asia’s fourth-largest economy hit 2.9% in September, maintaining the Bank of Korea’s 2% or higher target for 13 months.
As President Lee pushes to expand housing supply, the Bank of Korea warned on Thursday that “housing-related loans continued to increase, and the pace of housing price growth in Seoul and surrounding areas accelerated again.”
of Kospi was trading 1.23% lower. won Against the dollar, it rose slightly to trade at 1,326.1.
Gareth Leather, senior Asia economist at Capital Economics, said the pause does not mean the end of the tightening cycle, given the strong economy and persistent inflation. Governor Leather expects another rate hike at the Bank of Korea’s meeting next month.
South Korea’s growth has been primarily supported by semiconductor exports, as demand for chips to support the AI boom continues. Exports in September recorded a record sharp increase of 83.7% compared to the same month last year, and semiconductor shipments soared 263% compared to the same period last year.
The IMF forecasts the country’s growth rate for all of 2026 to be 3.3%. The country’s GDP growth rate was 3.8% and 3.7% in the first and second quarters, respectively, both exceeding expectations.
—CNBC’s Anniek Bao contributed to this report.
