The Bank of Korea decided on Thursday to pause interest rate hikes for the 12th consecutive meeting, continuing efforts to curb inflation. Policymakers are expected to soon agree to lower the highest borrowing costs in 15 years.
In this policy review, the benchmark interest rate was maintained at 3.50%, in line with the consensus of 40 economists surveyed by Reuters.
The Consumer Price Index released last week showed the inflation rate fell to 2.4% in June, the lowest in 11 months and close to the target of 2%. This has increased market expectations that the Bank of Korea may cut rates in the coming months.
The South Korean economy is facing stubborn inflationary pressures, and policymakers are waiting for sufficient evidence that prices are cooling before starting to lower borrowing costs from restrictive levels.
Focus is on the press conference by Bank of Korea Governor Rhee Chang-yong, scheduled at 2:10 KST (Korean Standard Time, GMT), where any dissenters might be named. Dissenting votes typically lead to policy changes in the following months.
Rhee Chang-yong mentioned on Tuesday that given the slowing price increases, along with a weaker Korean won and rising household debt, the central bank will consider a balance between inflation and financial stability.
Economists noted that while political pressure is pushing for an early rate cut, the Korean won has fallen about 7% against the dollar this year, which could delay the rate cut timeline.
