Bank of Korea holds rates as KRW stability takes priority – UOB Group

FXStreet Insights Team FXStreet

The Bank of Korea kept rates unchanged at 2.50% for a fifth straight meeting, with Governor Rhee highlighting currency stability as a key constraint on easing. A newly neutral policy stance and data-dependent guidance point to an extended rate pause, with most board members expecting no change over the next three months, UOB Group's Economist Ho Woei Chen notes.

BOK signals neutral stance and prolonged policy pause

"Bank of Korea (BOK) maintained its rate freeze at 2.50% for a fifth consecutive meeting in Jan in a unanimous decision on Thu (15 Jan). Governor Rhee Changyong flagged that the KRW was a major factor in the rate decision."

"The meeting also affirmed that BOK has shifted to a neutral stance and thus future policy decision will be data dependent and contingent on financial stability factors such as the exchange rate and housing market. Near-term bias remains for a prolonged rate pause. In his forward guidance, Governor Rhee said that five board members see 'high chance' of rate hold in the next three months while one sees the possibility of a rate cut."

"We maintain our call for BOK to stay on hold at 2.50% through 2026. The next rate decision is scheduled on 26 Feb. The BOK is expected to provide an updated economic forecast at the meeting."

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