Bank of Korea holds rate at 3%, keeps November hike in play

The hold had been fully anticipated, so market attention now turns to Governor Shin's press conference at 02:10 GMT for clues on whether a November move is still possible. A clear signal that the pause is only temporary would likely support the won and lift short-term Korean government bond yields. If the emphasis falls more on monitoring the impact of earlier hikes, the currency could come under pressure. The board's caution about recent stock market volatility suggests policymakers are reluctant to add pressure on equities, which may provide some support for the KOSPI. Chipmakers remain central to the growth story, thanks to record AI-driven exports. Energy prices are a key upside risk to inflation for Korea, a major oil importer. That leaves the outlook sensitive to any escalation in the Middle East that pushes crude higher.

Earlier (preview):

• Bank of Korea expected to hold rates today after two hikes, tightening cycle seen intact

The Bank of Korea has paused for breath rather than ending its tightening cycle, with record chip exports and persistent inflation keeping a November rate increase firmly in consideration.

Summary:

• The Bank of Korea kept its seven-day repo rate at 3.00%, matching the forecast of all 34 analysts in a Reuters poll
• The decision follows quarter-point rate rises in July and August, the central bank's first back-to-back increases in over three years
• Governor Shin Hyun Song has said policy will remain restrictive until inflation returns to the target level
• Headline inflation eased to 2.9% in September from 3.1% in August, still above the 2% goal
• Exports from January to September exceeded $800 billion for the first time, fueled by global AI investment
• The median forecast in the Reuters survey expects a hike to 3.25% in November, matching the central bank's dot plot

The Bank of Korea left its benchmark interest rate unchanged on Thursday, pausing after two straight quarter-point increases, though robust chip-led growth and inflation above target keep the door open for further tightening.

The monetary policy board voted unanimously to hold the seven-day repurchase rate at 3.00%, according to Reuters, a move predicted by all 34 economists surveyed. The central bank raised rates in July and August, its first consecutive tightening moves in more than three years. Governor Shin Hyun Song later said a gradual approach to tightening was preferable.

Speaking at an International Monetary Fund event on October 13, Shin repeated that policy would stay restrictive until inflation converges with the central bank's target. Analysts said before the meeting that a pause would slow the pace of tightening and tone down its hawkish stance. They noted that the central bank had pledged to monitor the effects of its back-to-back rate rises, and that recent market turbulence, especially in equities, made a hawkish decision less probable.

Headline consumer inflation slowed to 2.9% in September from 3.1% in August but remains above the Bank of Korea's 2% target. Growth is being driven by exports, which are benefiting from global spending on artificial intelligence. Shipments from January to September surpassed $800 billion for the first time on record, highlighting the strength of South Korea's semiconductor industry.

With growth expected to remain solid and inflation above the target, the median forecast in the Reuters survey points to a rate rise to 3.25% at the Bank of Korea's November meeting. That would align with the central bank's own dot plot projection, which outlines policymakers' expected rate path.

The decision means the pause is likely to be seen as a shift in pace rather than a change in direction. Markets will watch Shin's press conference, scheduled for 02:10 GMT, for signs on whether policymakers see a November hike as the most likely next move, and how they balance strong growth and inflation against recent financial market volatility.