Interest Rate in Korea

Korea Interest Rate | Economic News & Forecasts

Korea - Interest Rate

BOK holds rates in May

At its 31 May monetary policy meeting, the Bank of Korea (BOK) voted to hold the base rate steady at 1.75%—where it has been since November last year—as had been predicted by market analysts. Six of the seven board members voted in favor of maintaining rates; one member, however, voted to cut the rate by 25 basis points, owing to mounting downside risks.

The Bank’s decision came against a backdrop of muted inflation in recent months (May: 0.7%). Subdued inflationary pressures stem in part from a weakening economy and despite the marked depreciation of the Korean won. The BOK continues to expect inflation to edge up to the low- to mid-1.0% level for the second half of this year. More importantly, the Bank noted downside risks to the inflation outlook have increased somewhat.

While the Bank of Korea did not provide much forward guidance in its communiqué, aside from stating it will “maintain its accommodative monetary policy stance”, the dissenting vote for a rate cut could signal the Bank is now considering easing rates in the near future. Notably, the Bank mentioned the U.S.-China trade dispute in this month’s release, suggesting the Bank is increasingly concerned about its drag on Korean economic growth.

Commenting on the implications of the meeting, Nomura analysts noted that they “now view a rate cut in August as more likely”, projecting that they “continue to look for a total of 50bp of rate cuts, with the second cut most likely in November”.

The next monetary policy meeting is set for 18 July.

Met the why particular Consensus Forecast panelists expect the base rate to end 2019 at 1.70%. In 2020, our panelists see the policy rate on hold and also ending the year at 1.70%.

Korea - Interest Rate Data

2013  2014  2015  2016  2017  
Policy Interest Rate (%)2.50  2.00  1.50  1.25  1.50  

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Korea Interest Rate Chart

Korea Interest Rate
Note: KoB Base Rate in %.
Source: Bank of Korea.

Korea Facts

Bond Yield1.611.55 %Jun 13
Exchange Rate1,1830.21 %Jun 13
Stock Market2,113-0.11 %Jun 13

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