Bank of Korea Holds Base Rate at 3.0%

The Bank of Korea decided on the 16th to keep the current base rate at 3.0%.

The Bank made this decision during the Monetary Policy Board's meeting on monetary policy direction held at the Bank's headquarters in Seoul this morning. Previously, the Bank of Korea had cut the base rate by 0.25 percentage points twice consecutively in October and November last year.

The decision to hold the rate is interpreted as a measure considering the high exchange rate. The won-dollar exchange rate has been soaring since the emergency martial law declaration last December, remaining in the high 1400s without coming down. In such a situation, lowering the rate could widen the interest rate gap between Korea and the United States from the current 1.5 percentage points, potentially strengthening the won's weakness.

The Federal Reserve Bank's move to adjust the pace of rate cuts also seems to have influenced this decision. According to the new dot plot (a chart showing FOMC members' future interest rate level projections) released at the Federal Open Market Committee's regular meeting last December, Fed members projected the year-end base rate at 3.9%, 0.5 percentage points higher than the September forecast of 3.4%.