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Korea Interest Rate

Korea Interest Rate

BOK Base Rate in Korea

South Korea's central bank policy rate declined from 2013 to 2020 in order to stimulate growth and inflation. Post-pandemic, there was a gradual shift towards rate normalization, balancing economic recovery with emerging inflationary pressures.

The BOK Base Rate ended 2022 at 3.25%, above the 1.00% end-2021 value and also above the reading of 2.50% a decade earlier. For reference, the average policy rate in the Asia-Pacific region was 3.70% at the end of 2022. For more interest rate information, visit our dedicated page.

Korea Interest Rate Chart

Note: This chart displays Policy Interest Rate (%) for Korea from 2015 to 2014.
Source: Bank of Korea.

Korea Interest Rate Data

2018 2019 2020 2021 2022
BOK Base Rate (%, eop) 1.75 1.25 0.50 1.00 3.25
3-Month KORIBOR (%, eop) 1.90 1.51 0.81 1.41 4.04
10-Year Bond Yield (%, eop) 1.95 1.68 1.71 2.25 3.73

Central Bank maintains rates in April

At its meeting on 12 April, the Central Bank decided to keep the Base Rate unchanged at 3.50%, where it has been since January 2023.

The decision not to cut interest rates was primarily influenced by ongoing high inflation, uncertainty regarding the path of global monetary policy, and exchange rate volatility. Additionally, the domestic economy showed signs of improvement, mainly driven by exports and favorable labor market conditions, which supported the Central Bank's decision to uphold its restrictive policy stance. On the flipside, further monetary tightening was not warranted given that core inflation has trended down in recent months, despite remaining above the Central Bank’s 2.0% target.

The Central Bank indicated that it will maintain a restrictive monetary policy stance for a sufficient period until it is confident that inflation will converge on the target level. Most of our panelists expect rate cuts to ensue from Q3 this year, with over 50 basis points of cuts expected by end-2024.

On the outlook, United Overseas Bank’s Ho Woei Chen said: “We maintain our call for the BOK to begin cutting its interest rate only in 3Q24, likely in Aug rather than Jul. We pencil in 25 bps cut each in 3Q24 and 4Q24 to bring the rate to 3.00% by end-2024.” Goldman Sachs analysts see rate cuts coming slightly earlier: “The Governor highlighted data dependence for the next 1-2 months (May and June) to evaluate and possibly confirm underlying inflation trends. We continue to expect the BOK to start its cutting cycle with a 25bp cut in Q3, most likely July, followed by another 25bp cut in Q4.”

Consensus Forecasts and Projections for the next ten years

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Korean interest rate projections for the next ten years from a panel of 19 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for Korean interest rate.

Download one of our sample reports to visualize what a Consensus Forecast is and see our Korean interest rate projections.

Want to get access to the full dataset of Korean interest rate forecasts? Send an email to info@focus-economics.com.

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