Central bank holds key rate at 3% after two consecutive hikes amid persistent price pressures
The Bank of Korea held its key interest rate at 3 percent Thursday, pausing after two consecutive hikes as persistent inflation and financial stability risks complicated the policy outlook.
The central bank raised rates by 25 basis points in both July and August before opting to stand pat this month.
Inflation remains a key concern. Consumer prices rose 2.9 percent on-year in September, easing from 3.1 percent in August but remaining well above the BOK's 2 percent target. Higher oil prices, driven by the prolonged Middle East conflict, are adding pressure, with Brent crude approaching $112 a barrel on Tuesday, a five-month high.
Stronger-than-expected growth has also reduced the urgency for further policy adjustments.
Deputy Prime Minister and Finance Minister Lee Hyeong-il said at a press briefing in Bangkok on Oct. 16, on the sidelines of the IMF-World Bank annual meetings, that economic growth could reach 3.6 percent this year, exceeding the BOK’s August forecast of 3.3 percent.
The current account surplus reached $279.2 billion in the first eight months of the year, nearly quadrupling from $69.67 billion a year earlier.
Meanwhile, rising home prices and household debt continue to pose financial stability risks. Outstanding household loans at the five major banks reached 783.59 trillion won as of Thursday, up 2.76 trillion won from end-September, reversing last month's decline.
A stronger won could offer some relief from imported inflation. The currency strengthened to 1,322.8 won per dollar during Wednesday's trading, its strongest intraday level since October 2024.
ch0221@heraldcorp.com
