Bank of Korea Holds Steady After Back-to-Back Hikes — Update

By Kwanwoo Jun

South Korea's central bank held its policy rate steady Thursday after two consecutive increases but signaled further tightening as strong growth and above-target inflation persist.

The Bank of Korea kept its benchmark seven-day repurchase rate at 3.00% after raising it in July and August. The unanimous decision matched the expectations of all 23 economists surveyed by The Wall Street Journal, most of whom forecast another increase in November.

BOK Gov. Shin Hyun-song said the timing and pace of further rate increases would depend on incoming economic data. The central bank would maintain a tight policy stance until inflation converges toward its target, he said at a press conference.

The BOK expects growth this year to significantly exceed its August forecast of 3.3%, up from 2.6% in May.

The global artificial-intelligence boom and strong semiconductor exports continue to support economic growth. Policymakers are watching to see if those gains spill over into domestic demand and fuel inflation, strengthening the case for further rate increases.

South Korean exports accelerated in September, topping $120 billion for the first time, as semiconductor shipments more than tripled from a year earlier to a record high. The country is home to memory-chip makers Samsung Electronics and SK Hynix.

Headline inflation eased to 2.9% in September, while core inflation, which excludes volatile food and energy prices, edged down to 2.8%. Both remained above the BOK's 2% target.

The central bank's policymakers expect solid economic growth and above-target inflation to persist. They are also monitoring whether tensions in the Middle East add to cost pressures.

It expects headline and core inflation to average 2.7% and 2.5%, respectively, this year, in line with its August forecasts.

The bank is scheduled to release third-quarter gross domestic product data next week, offering another gauge of economic performance ahead of its November rate decision.

Nomura economist Jeong Woo Park expects GDP to have grown 1.6% from the previous quarter and 4.0% from a year earlier in the July-September quarter. The forecasts are sharply higher than his previous estimates of 0.1% and 2.4%, respectively. He also raised his full-year growth forecast to 3.6% from 3.2%.

Strong exports could boost growth further and strengthen the case for additional rate increases, Park said. But a weaker labor market, falling real wages and softer consumption suggest the chip boom has yet to spread to the broader economy, he added.

Nomura expects two more quarter-percentage-point rate increases, potentially in November and February next year.

Capital Economics economist Gareth Leather said South Korea's economy, supported by booming exports, appeared well placed to absorb tighter monetary policy. He expects a more limited rate-hiking cycle.

"For now, we think one further hike, most likely in November, is the likeliest outcome before an extended hold," Leather said.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com

(END) Dow Jones Newswires

October 22, 2026 00:20 ET (04:20 GMT)