South Korea Interest Rate

The Bank of Korea (BoK) unexpectedly kept its key interest rate at 3% during its January 2025 meeting, defying market expectations of a 25 bps cut. This decision came amid a weak won, which has been depreciating due to the global strength of the dollar, as well as political instability in the country, driving the currency to its lowest level in 15 years. Policymakers noted that while inflation has stabilized and household debt is slowing, downside risks to economic growth have risen. Evidence of this includes a slowing recovery in consumption, sluggish construction investment, and a weakening labor market. The GDP growth outlook is expected to fall below the November forecasts of 2.2% for last year and 1.9% for this year. Meanwhile, inflation remains stable and is expected to persist, but elevated exchange rates could exert upward pressure.