BOK holds interest rate steady at 2.75% in April amid "high uncertainty"

The Bank of Korea is holding its interest rate steady opting for a wait and see approach amid trade policy uncertainty.

Our correspondent Moon Hye-ryeon covers the central bank's latest decision.

South Korea's central bank has held its benchmark interest rate steady at 2-point-7-5 percent as widely expected.

It announced the decision on Thursday following the third Monetary Policy Committee meeting of the year, taking a break after a quarter-point cut in February.

"Considering the overall uncertain conditions, we decided to maintain our policy stance toward rate cuts, but judged that it would be appropriate to keep the base rate at its current level this time and observe further how domestic and external policy conditions evolve.

Unstable exchange rates for the Korean won against the greenback amid trade and political uncertainties had fueled expectations of a rate freeze.

Earlier this month, the exchange rate between the won and the U.S. dollar peaked at its highest in 16 years, before plummeting to its lowest for the year.

Currently, the interest rate gap between the U.S. and South Korea stands at 1-point-7-5 percentage points.

A further widening of the gap could drive more capital outflows, placing additional downward pressure on the won.

In its policy statement, the Bank of Korea highlighted increasing downside risks to growth, citing weak first-quarter economic performance and worsening global trade.

While domestic inflation remained stable at 2-point-1 percent year-on-year in March, the BOK noted that weak internal demand and persistent export market uncertainty significantly pressure the outlook.

It projected this year's economic growth rate to fall below its previous forecast of 1-point-5 percent, emphasizing the "highly uncertain" trajectory contingent on global trade negotiation outcomes.

Going forward, experts say that while concerns over the Korean won remain, the central bank is likely to look at other factors for future monetary policy decisions.

"Korea's exchange rate against the dollar is also affected by the dollar index, the Japanese yen, and the Chinese yuan. So, rather than making decisions based solely on the exchange rate, the outlook is that the Bank of Korea will start focusing more on the domestic economy."

"Looking ahead, the Bank of Korea said it would continue to monitor changes in both domestic and global conditions, signaling that further rate cuts remain on the table — but with a cautious approach.

Moon Hye-ryeon, Arirang News."