Bank of Korea extends rate pause, keeps hawkish tilt on price pressures
central bank kept its interest rate unchanged for a sixth straight meeting on Thursday while retaining a tightening bias, as policymakers stayed alert to higher oil prices that could interrupt a moderation in inflation.
The Bank of Korea (BOK) said price pressures would remain for longer than expected due to heightened uncertainties surrounding the Israel-Hamas conflict and global oil prices.
«The timing of consumer price inflation converging on the target level is more likely to be delayed than previously expected,» it said in a statement after keeping its key policy rate at 3.50%, as expected by all 49 economists polled by Reuters.
The South Korean economy has taken a hit from a cumulative 300 basis points of rate hikes since August 2021 that has been adding financial stress to households, among the most indebted in the world.
With markets not anticipating a rise in rates for the rest of the year, the focus is now on whether Governor Rhee Chang-yong will maintain his hawkish bias or signal a policy pivot.
«Above-target domestic inflation will keep the BOK guarded. September's print exceeded expectations at 3.7%, driven mainly by oil and agricultural prices.
U.S. policy uncertainty and the recent resurgence in household debt will also be on the BOK's radar,» ANZ economist Krystal Tan said ahead of the rate decision.
For the BOK, one of the first central banks to raise rates in August 2021, the battle against inflation is complicated by the risks from slowing growth in China, South Korea's biggest trading partner and a key driver of the global economy, as well as spiking local bond yields.
The yield on the policy sensitive three-year bond has shot up by nearly a full percentage point from its February low.
