BOK holds year-end key rate at 2.5%, ups growth forecast to 1.0%

Bank of Korea Governor Rhee Chang-yong. Yonhap.
SEOUL, November 27 (AJP) - As widely expected, the Bank of Korea kept its base rate unchanged at 2.5 percent on Thursday in its final policy meeting of 2025 — a decision that further narrows the appeal of Korean debt and assets at a time when the won is hovering at its weakest level of the year.

The freeze, delivered despite mounting FX stress, reflects the BOK’s expectation that it will regain policy maneuvering room if the U.S. Federal Reserve cuts its benchmark rate again in December. Monetary authorities trimmed the Korean policy rate twice in the first half of the year, lowering it a combined 50 basis points from 3.00 percent to 2.50 percent, but stayed put since May.

The pause came as housing demand roared back ahead of a hawkish incoming administration and as the frenzy for U.S. tech stocks fueled structural weakness in both the won and Korean bonds. Those dynamics sharply limited fiscal and monetary options as authorities attempted to stabilize markets.

The BOK’s easing cycle effectively stalled under the weight of renewed leveraged investment in property and equities. Korea’s household credit reached a record 1,918 trillion won ($1.3 trillion), with household loans alone totaling 1,845 trillion won — a staggering 96.2 percent of all household credit.

Volatility in the foreign-exchange market added another layer of constraint. The central bank’s data shows the volume-weighted average dollar–won rate at 1,417 won as of Tuesday — exceeding the previous record of 1,398.88 won set in 1998 during the IMF bailout. For comparison, the annual average was 1,276.4 won in 2009 following the global financial crisis.

The Bank of Korea separately raised this year's economic estimate to 1.0 percent from previous 0.9 percent and for next year's to 1.8 percent from 1.6 percent upon identifying stronger-than-expected exports led by AI chip boom.

 
Kim Yeon-jae Reporter duswogmlwo77@ajupress.com