BOK maintains rate for 3rd straight meeting amid rising Seoul home prices

Bank of Korea Gov. Rhee Chang-yong speaks during a press conference at the central bank in Seoul, Thursday. Yonhap

The Bank of Korea (BOK) held its key interest rate steady at 2.5 percent on Thursday, in what was a widely expected move driven by rising house prices and volatility in the won-dollar exchange rate.

This marks the third consecutive time that the rate has remained frozen since July, even after the central bank signaled a shift toward rate cuts.

The BOK said it has decided to further monitor financial stability, particularly the impact of recent government measures on Seoul's overheated real estate market and rising household debt.

Of the six members on the Monetary Policy Board, only Shin Sung-hwan dissented, calling for a rate cut. He cited the persistent negative output gap — the difference between actual and potential GDP — as a key risk to growth.

Despite new government interventions — including a mortgage cap of 600 million ($416,724) won introduced on June 27 and a sweeping designation of all Seoul districts as speculative zones on Oct. 15 — house prices in the capital have remained elevated.

Apartment prices in Seoul rose 0.54 percent in the second week of October, nearly double the increase seen in late September, according to the Korea Real Estate Board.

"The risk of household debt appears to have eased under the influence of the new policy," BOK Gov. Rhee Chang-yong said during a press conference. "But I don't expect the pace of price increases to ease anytime soon."

"Monetary policy should avoid stoking expectations of higher home prices," Rhee added.

Currency pressures have also returned. The won-dollar exchange rate surged back to the 1,430 range for the first time in five months. The won opened Thursday at 1,431.8 per dollar, down 2 won from the previous session.

Rhee said around three-quarters of recent foreign exchange volatility stems from regional and domestic factors, including weakness in the Chinese yuan and Japanese yen, as well as uncertainty surrounding U.S.–Korea tariff talks. The remaining quarter, he added, is driven by the strength of the U.S. dollar.

"The removal of these uncertainties in a positive way would likely support the currency’s stabilization," Rhee said.

The BOK said outcomes from upcoming U.S.–Korea and U.S.–China negotiations — expected to take place during next week's APEC summit — will be key to shaping Korea's growth outlook. In August, the central bank projected GDP growth of 0.9 percent this year and 1.6 percent in 2026.

"The BOK is expected to resume its rate cuts in the first quarter of 2026," said Kang Min-joo, senior economist at ING. "By that time, uncertainties related to U.S. tariffs may be resolved, the Federal Reserve may have implemented additional rate cuts, and the housing market may show signs of stabilization."

The Monetary Policy Board has one remaining meeting this year, scheduled for Nov. 27.