South Korea’s central bank keeps rate at 3% after two straight hikes

The outcome matched expectations from every one of the 34 economists polled by Reuters ahead of the decision. The pair of quarter-point moves that came before this pause represented the first time in over three years that the central bank had tightened policy in two straight meetings.

Governor Shin Hyun-song indicated the board favored moving carefully rather than rapidly, and during remarks at an IMF gathering on October 13, he repeated that borrowing costs would need to remain tight until price growth falls back in line with the bank’s goal.

Inflation slowed to 2.9% last month, down from 3.1% in August, though it continues to run hotter than the 2% target. Meanwhile, exports – lifted by worldwide spending tied to artificial intelligence – crossed the $800 billion mark for the nine months through September, a milestone never previously hit and one that highlights just how dominant the nation’s chip sector has become.

Separately, the country’s current account surplus for the first eight months of the year came in near $279 billion, nearly quadruple the roughly $70 billion posted over the same stretch last year, driven by robust foreign appetite for memory chips.

Economists surveyed by Reuters put their median forecast at a quarter-point move that would lift the rate to 3.25% when the Bank of Korea meets again in November, a view that lines up with the central bank’s own guidance.

Why it matters for markets: Any hints from Governor Shin about the likelihood and timing of a Bank of Korea rate hike in November could swing the won and shorter-maturity Korean government bond yields, with hawkish language typically lifting both the currency and yields. The persistent strength in semiconductor shipments also keeps chip stocks at the heart of the region’s growth narrative.

Sources: Investing.com (economy); investingLive; investingLive