The decision follows a 0.25 percentage point cut in February, marking the third such move since the Bank of Korea (BoK) resumed its monetary easing cycle in October, having paused it in August 2021.
The decision to keep the rate unchanged comes amid high volatility of the South Korean currency, won, partly due to tariffs imposed by the United States and rising internal political tensions.
“It was deemed appropriate to maintain the current level of the benchmark interest rate and continue evaluating any changes in internal and external conditions,” announced the BoK in a statement.
The central bank highlighted the “high uncertainty regarding the future trajectory of economic prospects due to changes in U.S. tariff policies” and also emphasized the need to “monitor the high volatility of the exchange rate and developments in household lending.”
The statement further mentions that due to poor performance in the first quarter and deteriorating trade conditions, the risks of a slowdown in growth have broadened.
The BoK states that domestic demand will slightly slow down in the future, and exports will continue to decelerate due to persistent uncertainty over trade conditions.
Consequently, the central bank does not rule out a possible contraction of the Gross Domestic Product (GDP) in the first quarter, estimating that this year’s growth rate is likely to be lower than the 1.5% forecast made in February.
BoK Governor Rhee Chang-yong supported this position at a press conference, stating that regulators “are in a dark tunnel” and prefer to moderate the pace and observe until the situation becomes clearer.
The official added that the growth rate of the first quarter might fall below the 0.2% estimate made in February, not ruling out a negative outcome.
