S. Korea Keeps Policy Rate Unchanged
Bank of Korea (BOK) Governor Rhee Chang-yong and fellow monetary policy committee members voted to keep the seven-day repurchase rate steady at 2.50 percent.
Markets anticipated the decision. A Korea Financial Investment Association survey of 100 fixed-income specialists revealed 96 percent forecasted a rate freeze this month.
The central bank has held rates constant during July, August, October, and November meetings following four quarter-point reductions—two in 2024 (February and May) and two in late 2023 (October and November).
Persistent currency volatility and unprecedented household borrowing levels drove the freeze strategy.
The South Korean won weakened to 1,424.4 per dollar at October's close from 1,402.9 won the prior month against the U.S. dollar.
Currency markets saw the won plunge to 1,476.0 during November 21 trading—its weakest since April 9's intraday peak of 1,487.6 won—as anxiety mounted over potential U.S. tariff escalations.
The U.S. Federal Reserve trimmed its federal funds target range by 25 basis points to 3.75-4.00 percent in October, shrinking the rate differential with South Korea to 1.50 percentage points.
Additional BOK rate cuts amid this persistent interest rate chasm with the United States risk triggering sharp currency depreciation.
Household borrowing from deposit-taking banks reached 1,173.7 trillion won ($800.0 billion) at October's end—climbing 3.5 trillion won ($2.4 billion) month-over-month.
Debt has expanded for nine straight months since February, fueled by robust mortgage demand.
Domestic property markets have fluctuated recently, with nationwide apartment transactions hitting 45,000 in May, dropping to 35,000 in July, then surging to 47,000 in September.
President Lee Jae Myung's administration, which assumed power in early June, unveiled housing price control measures, yet borrowing-fueled home purchases—particularly in Seoul—remained strong.
Pressure on the central bank to cut rates has diminished thanks to semiconductor export strength and reviving consumer confidence.
The BOK stated the economy continued its improvement trend, supported by a sustained recovery in consumption and by continued export growth.
Exports—comprising roughly half the export-dependent economy—grew 3.6 percent year-over-year in October despite reduced working days from Chuseok holidays, South Korea's equivalent of Thanksgiving.
Daily average exports surged 14.0 percent to an unprecedented monthly high of $2.98 billion last month, propelled by soaring chip demand.
The composite consumer sentiment index (CCSI), measuring consumer economic outlook, climbed 2.6 points to 112.4 in November—its first three-month gain.
The reading marked an eight-year high since November 2017's 113.9 level.
Inflation expectations—tracking consumer projections for headline inflation over the coming 12 months—held unchanged at 2.6 percent in November versus the previous month.
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