The Bank of Korea kept interest rates unchanged at 2.50% for the fifth straight meeting, with Governor Ri highlighting currency stability as a major impediment to easing. The new neutral policy stance and data-driven guidance signal a temporary pause on interest rates, with most board members expecting no change over the next three months, UOB Group economist Hu Wei Chen notes.
BOK signals neutral stance and long policy pause
“The Bank of Korea (BOK) kept the interest rate frozen at 2.50% for the fifth consecutive meeting in January in a unanimous decision on Thursday (Jan. 15). Governor Ri Chang-yong noted that the Korean won was a key factor in the interest rate decision.”
“The meeting also confirmed that the BOK has shifted to a neutral stance, so future policy decision will depend on the data and hinge on financial stability factors such as the exchange rate and the housing market. There is still a near-term bias to hold the interest rate for a long period. In his forward guidance, Governor Ri said that five Governing Council members see a ‘high opportunity’ to hold the interest rate in the next three months while one sees the possibility of a rate cut.”
“We continue our call for the BOK to remain steady at 2.50% until 2026. The next interest rate decision is scheduled for February 26. The BOK is expected to provide an updated economic forecast at the meeting.”
