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Bank of Korea Holds Interest Rate Steady to Address Currency Weakness and Trade Uncertainty

The central bank paused rate cuts at 2.75% to stabilize the won and assess the impact of U.S. tariffs and domestic political challenges.

The logo of the Bank of Korea is seen in Seoul, South Korea, November 30, 2017. REUTERS/Kim Hong-Ji/File Photo
Lee Jae-myung, former leader of the liberal Democratic Party, speaks during a ceremony pledging a clean election campaign held at the National Assembly in Seoul on April 16, 2025. (Yonhap)
Bank of Korea Gov. Rhee Chang-yong (C) presides over a Monetary Policy Committee meeting at the central bank in Seoul on April 17, 2025. (Pool photo) (Yonhap)
Bank of Korea (BOK) Gov. Rhee Chang-yong bangs the gavel to open a Monetary Policy Committee meeting at the central bank in Seoul on April 17, 2025. (Pool photo) (Yonhap)

Overview

  • The Bank of Korea maintained its benchmark interest rate at 2.75% on April 17, 2025, halting its recent monetary easing cycle.
  • The decision aims to stabilize the Korean won, which hit a 16-year low earlier this month following the announcement of U.S. reciprocal tariffs.
  • U.S. President Donald Trump imposed 25% tariffs on South Korean exports, later pausing their implementation for 90 days, creating uncertainty for policymakers.
  • South Korea's Finance Minister Choi Sang-mok is negotiating with the U.S. to delay tariff enforcement while planning a supplementary budget to support the economy.
  • The central bank anticipates further economic challenges, with growth likely to fall below its February projection of 1.5%, compounded by trade tensions and domestic political instability.