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BOK delays rate cut, but reaffirms easing cycle

Published: 23 Oct. 2025, 17:21 Updated: 23 Oct. 2025, 18:12

JIN MIN-JI
[email protected]

Bank of Korea (BOK) Governor Rhee Chang-yong speaks at a press conference held after the monetary policy board meeting at the BOK building in central Seoul on October 23. The board kept the interest rate steady at 2.50 percent for the third consecutive meeting.[BOK]

The Bank of Korea (BOK) held the base interest rate steady at 2.50 percent for the third consecutive meeting on Thursday, citing concerns about further overheating the housing market and increased volatility in the exchange rate, but left the door open for a further rate cut.

“Monetary policy board will keep its rate-cut cycle to mitigate downside risks to growth,” said the BOK Gov. Rhee Chang-yong in the press conference following the board meeting.

“Four of the six monetary policy board members, myself excluded, said they remain open about rate cuts in the next three months,” Rhee added. That is down from five members who were open to monetary easing in the August meeting.

Thursday’s rate freeze was widely expected, given the recent announcement of the government’s real estate policy to tame demand — which will take time to produce effects — the weak won that is being kept above the 1,400 won threshold and uncertainty over how Korea will finance the $350 billion investment it has pledged to the United States.

Only one board member, Shin Sung-hwan, voted for a rate cut to 2.25 percent, maintaining his stance from August. He argued that it would be more desirable to lower the rate promptly in consideration of the country’s weak growth and monitor its effects before deciding on further policy moves.

The BOK forecasts Korea to grow by 0.9 percent this year — the slowest since 2020 when the economy contracted by 0.7 percent — amid the impacts of tariffs on Korea’s exports.

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“Since the economy is significantly below its potential growth rate, this is not a situation where a rate freeze is appropriate,” said Rhee. However, cutting rates would lower borrowing costs and could accelerate housing prices. Also, holding the rate steady could signal to the market that the pace of future rate cuts will be more gradual, he added.

Rhee noted that several uncertainties need to be closely monitored in November, including the progress of Korea-U.S. trade negotiations, ongoing U.S.-China trade tensions, and how the surge in chip demand may be influenced by the conflict between the United States and China.

Given Rhee’s gradual stance on monetary easing, analysts have pushed back the expected timing of the rate cut.

“Although additional rate cuts are being considered, it is difficult to expect them in the near term,” said Kim Ji-man, a senior analyst at Samsung Securities, in a report on Thursday.

“Given that more time is needed to assess financial stability conditions, such as the slowing of the housing price increase, rate cuts are expected to be further delayed,” Kim added, revising the rate cut date from November to January 2026.

The delay of the rate cut until next year was also agreed upon by analysts Kim Ji-na of Eugene Investment & Securities and Ahn Ye-ha of Kiwoom Securities.

Following the delay in rate slashes, the Kospi fell 0.98 percent to close at 3,845.56 points on Thursday, though it reached a new record high above 3,900 points during trading.

The BOK cut the base interest rate twice this year, by a total of 50 basis points, in February and May. The final policy meeting for the year is scheduled for November 27.

BY JIN MIN-JI [[email protected]]