Bank of Korea Holds Interest Rate Steady at 3% in Unexpected Decision

The central bank pauses rate cuts to evaluate economic risks as political and financial challenges mount in South Korea.

The Bank of Korea unexpectedly kept its benchmark interest rate at 3%, defying predictions of a 25-basis-point cut by most economists polled.
The decision follows two consecutive rate cuts in 2024 and comes as the South Korean won has weakened to a 15-year low against the US dollar.
Political instability, including the recent impeachment and arrest of President Yoon Suk Yeol, has added to economic uncertainty and slowed growth projections for 2025 to 1.8%, down from 2.2%.
The central bank cited heightened risks to economic growth, exchange rate volatility, and global oil price uncertainties as key factors influencing its decision.
South Korea's stock indices rose following the announcement, while economists anticipate a more gradual pace of rate cuts in the coming months.