BOK holds policy rates steady for eighth consecutive time

BOK Governor Rhee Chang-yong [Photo by Joint Press Corps]

South Korea’s central bank kept policy rates unchanged at 3.5 percent at its first meeting of 2024 on January 11th, 2024, and hinted at a full-fledged shift toward a policy pivot to begin later in the year.

After its rate-setting meeting on Thursday, the Bank of Korea’s monetary policy board kept the policy rate at 3.5 percent in its eighth rate pause since February 2023.

BOK Governor Rhee Chang-yong ruled out an additional rate hike, saying “Price increases have slowed with lower risks of international oil prices and geopolitical tensions in the Middle East.”

However, the central bank still took a cautious stance on rate cuts. “I do not think we are going to see a rate cut for at least six months,” Rhee said during a press conference. “Cutting rates too quickly could cause inflationary expectations to surge again.”

Market analysts expected the first rate cut to take place in the second half of 2024.

“The BOK may announce its first rate cut as soon as July 2024, but will not be in a hurry to lower rates, given the prospects of inflation and potential rate cuts by the U.S. Federal Reserves,” Korea Institute of Finance senior researcher Jang Min said.