South Korea's Bank of Korea (BOK) kept its benchmark interest rate unchanged at 3% on Thursday, defying market expectations.
The bank's decision came after it trimmed its key rate for two months in a row, both times by 25 basis points. The first cut was widely anticipated, but the second slash caught the market by surprise and set economists up to expect the first triple cut since 2009. This was not to be however, with the central bank saying on Thursday that while inflation had stabilized and household debt had slowed down, downside risks to economic growth have "intensified" and the "volatility of exchange rates has increased" due to the "unexpected political risks that have recently escalated."
The BOK pointed out that the Korean won to US dollar exchange rate has "risen significantly," attributing the rise to "increased domestic political uncertainties and the possibility of more gradual rate cuts in the US."
