The Bank of Korea held its key interest rate at 2.5 percent on Thursday. The decision comes amid rising housing prices and currency fluctuations. This interest rate mark is the third consecutive hold since July, despite prior signals pointing to potential cuts.
Governor Rhee Chang-yong said the bank will closely monitor financial stability. He cited risks in Seoul’s housing market and rising household debt.
The Monetary Policy Board has six members. Only Shin Sung-hwan dissented, calling for a rate cut due to the negative output gap. He warned that economic growth faces pressure.
The government has introduced measures to ease housing pressures. These include a 600 million won mortgage cap and designating all Seoul districts as speculative zones. Yet, apartment prices in Seoul rose 0.54 percent in early October, nearly double September’s increase.
Rhee said household debt risks have eased somewhat. However, he warned that home prices are unlikely to stabilize soon. He added, “Monetary policy should avoid stoking expectations of higher home prices.”
Currency volatility also returned. The won-dollar rate surged back to the 1,430 range, opening at 1,431.8 per dollar. Rhee noted that 75 percent of the volatility comes from domestic and regional factors, including the Chinese yuan and Japanese yen. The remaining 25 percent comes from U.S. dollar strength.
Upcoming APEC negotiations, including U.S.–Korea and U.S.–China talks, will influence Korea’s growth outlook. In August, the central bank projected GDP growth of 0.9 percent in 2025 and 1.6 percent in 2026.
Economists expect the Bank of Korea to resume interest rate cuts in early 2026. Kang Min-joo of ING said cuts may follow tariff resolutions, potential Fed rate reductions, and housing market stabilization.
The Monetary Policy Board has one remaining meeting this year, scheduled for November 27. Analysts expect careful monitoring of financial risks before any new action.
