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BOK keeps interest rate steady amid housing market pressures, increasing exchange rate

Published: 27 Nov. 2025, 10:12 Updated: 27 Nov. 2025, 13:07

Bank of Korea Governor Rhee Chang-yong attends a monetary policy board meeting at the central bank’s headquarters in Jung District, central Seoul, on Nov. 27. [NEWS1]

The Bank of Korea (BOK) held its key interest rate steady Thursday, citing persistent housing market pressures and heightened volatility in the foreign exchange market as the won-dollar exchange rate continues to rise.

Following a monetary policy board meeting, the central bank announced that it would keep the base rate unchanged at 2.5 percent. This marks the fourth consecutive freeze since May. The BOK had previously lowered the rate four times between October 2024 and May 2025, totaling a 1 percentage point cut.

With this latest decision, the rate gap between Korea and the United States remains at 1.75 percentage points.

Whether the BOK will pursue further rate cuts remains uncertain. In a recent interview, BOK Gov. Rhee Chang-yong said that any shift in direction, or the extent and timing of a rate cut, will depend on incoming data, hinting at a possible end to the current easing cycle.

The central bank also revised its growth and inflation outlook upward, projecting the economy to grow by 1 percent this year and 1.8 percent next year, up from previous forecasts of 0.9 percent and 1.6 percent, respectively. Inflation projections were also raised to 2.1 percent for both years, from 2 percent and 1.9 percent.

Rising growth and inflation typically reduce the need for additional rate cuts.

Ongoing housing price increases in the greater Seoul area and the rising won-dollar exchange rate are key concerns for the BOK. The increasing exchange rate drives up the cost of imports, complicating inflation management.

Some analysts suggest that if the U.S. Federal Reserve begins lowering rates as expected next month, narrowing the interest rate gap could ease downward pressure on the won. That scenario may prompt the BOK to reconsider another rate cut.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM NAM-JUN [[email protected]]