Interest Rate in Korea

Korea Interest Rate | Economic News & Forecasts

Korea - Interest Rate

BOK stands pat in January and turns less dovish

At its 17 January monetary policy meeting, the Bank of Korea (BOK) voted to keep the base rate unchanged at 1.25%, as had been widely expected by market analysts. The decision marks the second consecutive hold after the BOK twice lowered rates in 2019.

The Bank kept its accommodative monetary stance, citing muted price pressures, sluggish global trade and geopolitical risks. Inflation accelerated to 0.7% in December from 0.2% in November, and the Bank expects it to pick up slightly this year and average roughly 1.0%. Nevertheless, inflation will likely remain below the Bank’s target rate of 2.0% for this year and 2021. Meanwhile, the domestic economy seems to be gaining some momentum, as employment levels and housing prices have increased slightly in recent months, which should be stoking household spending growth.

The BOK took a more or less neutral stance in its communiqué, and kept its inflation and economic growth outlook roughly unchanged from its previous meeting for this year. The BOK noted recent strength in the won due to optimism linked to U.S.-China trade relations and early signs of a recovery in the semiconductor industry. Moreover, trade tensions between Korea and Japan have seemingly thawed in recent weeks. These developments bode well for the external sector.

Commenting on the BOK’s tone, analysts at Goldman Sachs noted:

“On the dovish side, the number of dissenting votes has increased, whereas on the slightly hawkish side, the governor and MPC statement noted early signs of recovery in macro indicators vs. rises in household debt and housing prices […] from the overall balanced tone from the governor's press conference that the BOK will likely stay on hold for some time before the next policy rate change. We keep our view of another rate cut, most likely in July”.

The next monetary policy meeting is set for 27 February.

FocusEconomics Consensus Forecast panelists project the base rate to end 2020 at 1.13% and to end 2021 at 1.40%.

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

Value Change Date
Bond Yield1.681.55 %Dec 31
Exchange Rate1,1560.21 %Dec 31

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