Bank of Korea holds base rate at 3.00% and keeps further hikes on the table

The Bank of Korea left its base rate unchanged at 3.00 percent on October 22. All seven members of the Monetary Policy Board supported the decision, which keeps the rate in place until the next meeting.

The Board said it needed to assess the effects of its two earlier preemptive rate hikes and to monitor uncertainty linked to tensions in the Middle East and to the monetary and fiscal policies of major economies.

The economy has grown faster than expected, led by exports and investment. The central bank now expects growth this year and next to be considerably higher than its August forecasts of 3.3 percent and 2.9 percent.

Consumer price inflation was 2.9 percent in September, and core inflation was 2.8 percent. The bank expects inflation this year to be broadly in line with its August forecasts of 2.7 percent for consumer prices and 2.5 percent for core prices, while inflation next year is expected to exceed earlier forecasts of 2.3 percent and 2.5 percent.

The Board also pointed to financial stability risks. Housing price increases accelerated again, particularly for lower and mid-priced homes in Seoul and parts of Gyeonggi Province, and it flagged risks related to household debt. The won-dollar exchange rate has recently fallen significantly, supported by a large current account surplus.

The Board said it will continue its policy response until it is confident that inflation will converge stably to its target, and will determine the timing and pace of further base rate hikes while closely monitoring incoming data.