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BOK says 3-month interest rate guidance reduces volatility, 1-year projection under review

Published: 15 Dec. 2025, 16:56

Bank of Korea Gov. Rhee Chang-yong speaks during a monetary policy conference in Seoul on Dec. 15. [YONHAP]

The Bank of Korea (BOK) said Monday that its three-month policy rate outlook has helped shape market expectations and reduce volatility, as the central bank considers extending its forecast horizon to improve policy predictability.

The BOK made the assessment during a monetary policy conference held in Seoul, noting that it is reviewing ways to extend its forward guidance outlook to enhance the predictability of policy rate decisions.

"The three-month interest rate outlook has had a positive impact on forming market expectations for the policy rate and easing volatility in market interest rates," Kim Byung-kuk, head of the policy coordination team at the BOK's Monetary Policy Department, said.

"But the forecast horizon is somewhat shorter than those used by major economies or dot-plot systems. Since July last year, the BOK has been conducting simulations of various approaches, including presenting multiple rate projections within a one-year horizon," he added.

Currently, BOK Gov. Rhee Chang-yong discloses the distribution of Monetary Policy Board members' views on the policy rate outlook three months ahead by responding to questions at press briefings following rate-setting meetings.

In his address during the conference, Rhee said the central bank faces challenges of identifying appropriate monetary policy tools against market uncertainties, amid clashes of policy variables and the advancement of digitalization in finance.

"The central bank is in a transitional phase of reassessing various views on providing more information to the market, as well as determining the most effective way to do so," he said. "The BOK has actively pursued institutional changes related to monetary policy, but tasks still remain in further enhancing policy effectiveness."

Yonhap