South Korea’s central bank left interest rates unchanged at 2.5% on Wednesday, signaling caution as a weak won and soaring home prices leave policymakers with little room to maneuver.
The Bank of Korea’s decision marks its third consecutive hold, underscoring how the country-one of America’s key trade and technology partners-is balancing domestic inflation pressures against a stronger dollar and ongoing U.S.-Korea trade negotiations.
Governor Rhee Chang-yong said the bank would monitor the effects of Seoul’s new housing measures and recent currency volatility before considering a rate cut later this year. The won has traded above ₩1,430 per dollar, its weakest level in months, amid concerns that rising U.S. yields and tariff uncertainty could accelerate capital outflows.
For Washington, South Korea’s stance matters more than it might seem. The country plays a pivotal role in global semiconductor and battery supply chains, and its monetary stability directly affects export competitiveness and investment flows that link the two economies.
Analysts say the BOK’s hesitation highlights how even advanced economies aligned with the U.S. are feeling the strain of high American interest rates. “Korea can’t cut aggressively until the Fed does,” said one Seoul-based economist. “The risk of further won depreciation is simply too high.”
The central bank began lowering rates last October for the first time in over four years, but with housing prices climbing and global markets jittery, its path toward monetary easing remains uncertain.
