Bank of Korea holds rates; upbeat outlook points to future hikes
The central bank keeps base rate unchanged at 3%, as expected; it says further tightening remains on the table
Published Thu, Oct 22, 2026 · 01:41 PM
[SEOUL] The Bank of Korea (BOK) kept its benchmark interest rate unchanged on Thursday (Oct 22) but maintained a hawkish stance by upgrading its economic growth forecasts and remaining upbeat about the country’s export momentum.
The seven-member monetary policy board at the BOK voted to keep the seven-day repurchase rate at 3 per cent, a decision that was forecast by all 34 analysts surveyed by Reuters.
The central bank said that further tightening remains on the table, stating it “will decide the timing and pace of future increases” while assessing inflation, financial stability and domestic economic trends.
“The growth rates for this year and next year are expected to be considerably higher than the August forecasts of 3.3 per cent and 2.9 per cent, respectively,” the BOK said in a statement, adding a pause on Thursday was needed to evaluate external risks and the lagging effects of its back-to-back hikes in July and August.
It also said that both headline and core inflation for next year will exceed previous forecasts.
During a news conference, BOK governor Shin Hyun-song declined to comment on a question about terminal interest rates and added “I don’t believe it is necessary to strictly follow that path (market consensus).”
Instead of sticking to a fixed trajectory, Shin pointed out that the bank will evaluate incoming data as it emerges. “We will refine our own thinking and continue to conduct monetary policy with an open mind.”
Analyst consensus puts the peak policy rate at 3.50 per cent, pricing in one more hike this November and another in the first quarter of 2027.
“His statement that the bank won’t blindly follow market estimates shouldn’t be interpreted as casting doubt on a 3.50 per cent terminal rate – rather, it suggests the actual path could differ from the projected November and Q1 timeline,” said Paik Yoon-min, analyst at Kyobo Securities. “Passing on a November hike carries risks, as moving forward with it is crucial to signal a firm stance on containing inflation.”
Paik sees the BOK raising interest rates at its Nov 26 meeting and in the first quarter of 2027.
Three-year bond futures held steady as the market largely anticipated that the BOK would signal another rate hike, potentially in November.
The US Federal Reserve target rate sits at 4 per cent following a 25-basis-point hike in September. The current market consensus expects the Fed to hold rates steady at its October meeting before implementing a final year-end hike in December.
For the BOK, the July and August increases were its first consecutive hikes in more than three years, after which Shin said a gradual pace of tightening was preferred.
Shin, however, reiterated at an International Monetary Fund event on October 13 that policy would remain restrictive until inflation converges to its target.
Headline consumer inflation slowed to 2.9 per cent in September from 3.1 per cent in August, remaining above the bank’s 2 per cent target.
Exports are powering ahead thanks to global spending on artificial intelligence. Shipments from January to September topped US$800 billion for the first time ever. REUTERS
