Bank of Korea Holds Rate at 3.00% but Signals More Hikes as Growth, Inflation Run Hot

The Bank of Korea (BOK) kept its benchmark policy rate unchanged at 3.00% on Thursday, pausing after back-to-back quarter-point hikes in July and August, but Governor Shin Hyun-song signalled that the tightening cycle is not over as growth and price pressures run hotter than the central bank expected, AJU Press reported.

The monetary policy board voted unanimously for the hold, according to AJU Press, Korea JoongAng Daily and The Investor. The outcome matched the forecasts of all 34 analysts polled by Reuters, whose survey median pointed to a further increase to 3.25% at the November meeting.

Stronger growth and inflation than expected

Speaking at his post-decision press conference, Shin said “growth and inflationary pressures are both stronger than we anticipated in August,” Korea JoongAng Daily reported. The BOK now expects growth this year and next to considerably exceed its August projections of 3.3% for 2026 and 2.9% for 2027, driven by booming semiconductor exports and investment.

AI-related chip demand continues to power the export engine. Shipments in the first 20 days of October more than doubled, rising 105.4% from a year earlier to US$61.6 billion, with semiconductor exports hitting a record US$27.5 billion, AJU Press said. The central bank expects full-year exports to reach US$1 trillion and the current account surplus to top its earlier US$450 billion estimate.

On prices, consumer inflation eased to 2.9% in September from 3.1% in August but remains above the 2% target, while producer prices climbed 7.7% year on year. The BOK kept its 2026 headline and core inflation forecasts broadly unchanged at 2.7% and 2.5%, but now sees both exceeding prior estimates in 2027. Shin said inflation was expected to approach the target “in the year after next”, implying around 2028, according to AJU Press.

Shin also said the earlier hikes had helped slow home price gains and a gauge of financial vulnerability, The Investor reported, adding that consumer spending had temporarily softened amid stock market corrections and an auto industry strike.

Won firms, bond yields ease

The won strengthened to around 1,323 per US dollar on Thursday afternoon, up sharply from the mid-1,500s in June, though Shin said the currency remains weaker than in previous years. Three-year government bond yields slipped 2.4 basis points to 3.808%, while the 10-year yield fell 3.2 basis points to 4.135%, AJU Press reported.

Equities fared worse. The benchmark KOSPI closed down 3.52% at 5,533.77, erasing the previous session’s chip-led gains, according to Yonhap figures carried by Korea JoongAng Daily.

What’s next

The BOK’s final rate-setting meeting of the year is on November 26, when it will release updated growth and inflation forecasts, AJU Press said. Policymakers will review third-quarter GDP and October inflation data before then.

Economists largely expect more tightening. Kong Dong-rak of Daishin Securities sees a November hike and a terminal rate of 3.5%, while Samsung Securities’ Kim Ji-man described Shin’s remarks as hawkish and expects rates to peak at 3.75%, Korea JoongAng Daily reported. JPMorgan’s Park Seok-gil forecasts three more quarter-point increases through the second quarter of 2027, which would also take the rate to 3.75%.

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