On November 27, the Bank of Korea’s Monetary Policy Board left the benchmark interest rate unchanged at 2.50% during its monetary policy meeting.
The decision reflects concerns that lowering the policy rate amid a sharp rise in the won–dollar exchange rate—recently fluctuating above the 1,470-won level, the highest in seven months—could further weaken the won and intensify upward pressure on the exchange rate.
The board also needs more time to assess whether housing prices and household lending in the Seoul metropolitan area are stabilizing following measures such as the October 10 and October 15 policy packages. In addition, markets are watching whether the U.S. Federal Open Market Committee (FOMC) will cut its policy rate at the December 9–10 (local time) meeting as widely expected.
Last October, the board shifted toward an easing stance by cutting the rate by 0.25 percentage points, followed by an unexpected back-to-back cut the following month—the first consecutive reductions since the global financial crisis.
In the first half of this year, the easing cycle continued with two additional cuts in February and May. Facing sluggish domestic demand in construction and consumption, as well as concerns about U.S. tariff impacts, policymakers focused on stimulating the economy amid projections that annual GDP growth would fall into the 0% range.
However, since the second half, the board has paused the rate-cut cycle, holding the rate steady for four consecutive meetings in July, August, October, and November.
The primary reason is heightened instability in foreign exchange and financial markets, including exchange rate volatility and housing price trends.
On November 24, the won–dollar rate closed daytime trading at 1,477.1 won in Seoul, marking a seven-and-a-half-month high since April 9, when U.S. tariff concerns had spiked.
The recent weakness of the won has been driven by a stronger U.S. dollar amid uncertainty over the Federal Reserve's policy path, as well as increased dollar investment demand from Korean retail investors investing abroad.
In response, the Ministry of Economy and Finance, Ministry of Health and Welfare, Bank of Korea, and National Pension Service held a joint meeting on November 24 to assess the impact of overseas investment flows on the foreign exchange market. On November 26, Deputy Prime Minister and Finance Minister Koo Yoon-cheol held an unusual press briefing to reiterate the government’s commitment to stabilizing the exchange rate. While the rate eased into the 1,460-won range that day (closing at 1,465.6 won in daytime trading), overall market sentiment remains fragile.
In this “exchange-rate emergency,” the Bank of Korea has little incentive to cut rates and accelerate the won’s depreciation.
In principle, when the Korean policy rate falls far below the U.S. rate—given that the won is not a global reserve currency—foreign capital tends to outflow in search of higher returns elsewhere, increasing depreciation risks.
The board also appears concerned that a rate cut could reignite housing prices and household lending.
According to the Korea Real Estate Board, Seoul’s average apartment sales price rose 0.20% in the third week of November (as of November 17). The growth rate had peaked at 0.50% in the third week of October following the October 10 and 15 measures, declined for three consecutive weeks, and then rebounded slightly after four weeks.
Outstanding household loans at the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH NongHyup) reached 769.2738 trillion won as of November 20, an increase of 2.6519 trillion won so far this month. This already exceeds the total increase recorded in October (2.527 trillion won). The average daily increase of 132.6 billion won is the highest since July (133.5 billion won).
Meanwhile, improving export performance—particularly in semiconductors—and recovering private consumption have eased pressure on the board to cut rates for the sake of economic stimulus.
Reflecting these trends, the central bank raised its growth outlook in its revised economic projection released on the same day, upgrading this year’s GDP growth forecast from 0.9% to 1.0% and next year’s from 1.6% to 1.8%.
Some experts argue that the Bank of Korea’s rate-cut cycle may have already ended, given signs of economic recovery and concerns over exchange rate and housing market instability.
Park Jung-woo, economist at Nomura Securities, said, “With solid export performance led by semiconductors and recovering consumption, the need for further rate cuts has diminished. Even without additional cuts, Korea’s economic growth could return to its potential trend.”
Others, however, maintain that the possibility of additional cuts next year remains. Cho Young-moo, head of NH Financial Research Institute, said, “Following the change of the BOK governor in April, the easing cycle could resume with one or two cuts in the second half of next year. Much of the projected GDP improvement next year is due to base effects, and as those effects fade later in the year, concerns over the economy could increase, prompting the BOK to consider further rate cuts.”
On November 27, the Bank of Korea’s Monetary Policy Board left the benchmark interest rate unchanged at 2.50% during its monetary policy meeting.
The decision reflects concerns that lowering the policy rate amid a sharp rise in the won–dollar exchange rate—recently fluctuating above the 1,470-won level, the highest in seven months—could further weaken the won and intensify upward pressure on the exchange rate.
The board also needs more time to assess whether housing prices and household lending in the Seoul metropolitan area are stabilizing following measures such as the October 10 and October 15 policy packages. In addition, markets are watching whether the U.S. Federal Open Market Committee (FOMC) will cut its policy rate at the December 9–10 (local time) meeting as widely expected.
Last October, the board shifted toward an easing stance by cutting the rate by 0.25 percentage points, followed by an unexpected back-to-back cut the following month—the first consecutive reductions since the global financial crisis.
In the first half of this year, the easing cycle continued with two additional cuts in February and May. Facing sluggish domestic demand in construction and consumption, as well as concerns about U.S. tariff impacts, policymakers focused on stimulating the economy amid projections that annual GDP growth would fall into the 0% range.
However, since the second half, the board has paused the rate-cut cycle, holding the rate steady for four consecutive meetings in July, August, October, and November.
The primary reason is heightened instability in foreign exchange and financial markets, including exchange rate volatility and housing price trends.
On November 24, the won–dollar rate closed daytime trading at 1,477.1 won in Seoul, marking a seven-and-a-half-month high since April 9, when U.S. tariff concerns had spiked.
The recent weakness of the won has been driven by a stronger U.S. dollar amid uncertainty over the Federal Reserve's policy path, as well as increased dollar investment demand from Korean retail investors investing abroad.
In response, the Ministry of Economy and Finance, Ministry of Health and Welfare, Bank of Korea, and National Pension Service held a joint meeting on November 24 to assess the impact of overseas investment flows on the foreign exchange market. On November 26, Deputy Prime Minister and Finance Minister Koo Yoon-cheol held an unusual press briefing to reiterate the government’s commitment to stabilizing the exchange rate. While the rate eased into the 1,460-won range that day (closing at 1,465.6 won in daytime trading), overall market sentiment remains fragile.
In this “exchange-rate emergency,” the Bank of Korea has little incentive to cut rates and accelerate the won’s depreciation.
In principle, when the Korean policy rate falls far below the U.S. rate—given that the won is not a global reserve currency—foreign capital tends to outflow in search of higher returns elsewhere, increasing depreciation risks.
The board also appears concerned that a rate cut could reignite housing prices and household lending.
According to the Korea Real Estate Board, Seoul’s average apartment sales price rose 0.20% in the third week of November (as of November 17). The growth rate had peaked at 0.50% in the third week of October following the October 10 and 15 measures, declined for three consecutive weeks, and then rebounded slightly after four weeks.
Outstanding household loans at the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH NongHyup) reached 769.2738 trillion won as of November 20, an increase of 2.6519 trillion won so far this month. This already exceeds the total increase recorded in October (2.527 trillion won). The average daily increase of 132.6 billion won is the highest since July (133.5 billion won).
Meanwhile, improving export performance—particularly in semiconductors—and recovering private consumption have eased pressure on the board to cut rates for the sake of economic stimulus.
Reflecting these trends, the central bank raised its growth outlook in its revised economic projection released on the same day, upgrading this year’s GDP growth forecast from 0.9% to 1.0% and next year’s from 1.6% to 1.8%.
Some experts argue that the Bank of Korea’s rate-cut cycle may have already ended, given signs of economic recovery and concerns over exchange rate and housing market instability.
Park Jung-woo, economist at Nomura Securities, said, “With solid export performance led by semiconductors and recovering consumption, the need for further rate cuts has diminished. Even without additional cuts, Korea’s economic growth could return to its potential trend.”
Others, however, maintain that the possibility of additional cuts next year remains. Cho Young-moo, head of NH Financial Research Institute, said, “Following the change of the BOK governor in April, the easing cycle could resume with one or two cuts in the second half of next year. Much of the projected GDP improvement next year is due to base effects, and as those effects fade later in the year, concerns over the economy could increase, prompting the BOK to consider further rate cuts.”