Statement from the October Monetary Policy Meeting
The Monetary Policy Committee of the Bank of Korea announced on the 23rd that it would keep the base interest rate unchanged at 2.50% per annum, stating, "It is necessary to further examine the impact of real estate measures on the housing market in the Seoul metropolitan area, household debt, and exchange rate volatility, as well as the overall financial stability situation." The committee added, "We have determined that maintaining the current level is appropriate."
Lee Chang-yong, Governor of the Bank of Korea, is attending the Monetary Policy Committee plenary session held at the Bank of Korea in Jung-gu, Seoul, on the morning of the 23rd, and is striking the gavel. 2025.10.23. Photo by Joint Press Corps
In the statement on the direction of monetary policy distributed this morning, the committee noted, "Although uncertainty in the growth outlook remains high, improvements continue, particularly in consumption and exports." The committee further predicted, "Going forward, domestic demand will continue to recover, led by consumption, and exports are expected to remain favorable for the time being due to the robust semiconductor market. However, the impact of U.S. tariffs is expected to gradually increase."
The committee went on to say, "Growth rates for this year and next year are expected to generally align with the projections made in August, which were 0.9% and 1.6%, respectively." However, it also noted, "Uncertainties, both upward and downward, have increased regarding Korea-U.S. and U.S.-China trade negotiations, the semiconductor market, and the pace of domestic demand improvement."
The committee also pointed out that volatility in the won-dollar exchange rate has increased, thereby expanding risks to some extent. The committee stated, "The won-dollar exchange rate has risen significantly due to uncertainties related to U.S. tariff negotiations and renewed U.S.-China trade tensions." Regarding household loans and housing prices, the committee assessed, "The growth in household loans has decreased substantially, but in the Seoul metropolitan housing market, both prices and transaction volumes have increased again."
The committee stated, "While the domestic economy continues to improve with stable inflation, uncertainties related to trade negotiations and the outlook for the semiconductor market have increased." It added, "From a financial stability perspective, it is necessary to assess the effects of the government's additional real estate measures and to pay attention to the impact of heightened exchange rate volatility."
The following is the full text of the statement on the direction of monetary policy.
The Monetary Policy Committee has decided to maintain the Bank of Korea's base interest rate at the current level of 2.50% until the next decision on the direction of monetary policy. While inflation continues to remain stable, growth uncertainty remains high. However, improvements are ongoing, particularly in consumption and exports. Given the need to further examine the impact of real estate measures on the Seoul metropolitan housing market and household debt, as well as exchange rate volatility and the overall financial stability situation, the committee has determined that maintaining the current base rate is appropriate.
Regarding the global economy, the committee noted that growth momentum is slowing as the impact of U.S. tariff increases becomes more evident, and inflation trajectories are expected to diverge by country. In international financial markets, long-term government bond yields have declined due to the U.S. Federal Reserve's rate cuts and renewed U.S.-China trade tensions, while the U.S. dollar has experienced significant fluctuations, influenced by concerns over fiscal soundness in major economies. Stock prices have continued to rise sharply, especially in sectors related to artificial intelligence. Looking ahead, the global economy and international financial markets are expected to be influenced by U.S.-China trade negotiations, the direction of tariffs by product, and changes in monetary and fiscal policies in major countries.
In the domestic economy, despite sluggish construction investment, improvements continued due to sustained recovery in consumption and strong growth in exports. Employment increased overall, but major industries such as manufacturing continued to see declines. Going forward, domestic demand is expected to continue recovering, led by consumption, and exports are expected to remain favorable for the time being due to the strong semiconductor market. However, the impact of U.S. tariffs is expected to gradually increase. Growth rates for this year and next year are expected to generally align with the projections made in August (0.9% and 1.6%, respectively), but uncertainties, both upward and downward, have increased regarding Korea-U.S. and U.S.-China trade negotiations, the semiconductor market, and the pace of domestic demand improvement.
Domestically, inflation remained stable in September, with the consumer price index rising by 2.1% and core inflation (excluding food and energy) by 2.0%. Short-term inflation expectations among the general public fell slightly to 2.5% in September from 2.6% in the previous month. Going forward, domestic inflation is expected to remain around 2%, supported by low demand pressures and stable international oil prices, despite the rise in the exchange rate. Accordingly, the consumer price inflation rates for this year and next year (2.0% and 1.9%, respectively) and core inflation rates (both 1.9%) are projected to be in line with the August forecasts. The future inflation path is expected to be influenced by domestic and global economic trends, exchange rates, international oil prices, and the government's price stabilization measures.
In financial and foreign exchange markets, stability continued until late September, after which volatility in exchange rates and interest rates increased somewhat. The won-dollar exchange rate rose significantly due to uncertainties over U.S. tariff negotiations and renewed U.S.-China trade tensions, while government bond yields fluctuated within a narrow range before rising due to heightened concerns over financial stability. Stock prices rose sharply, driven by the robust semiconductor market and expectations for improvements in capital market systems. Although the growth in household loans decreased substantially, prices and transaction volumes in the Seoul metropolitan housing market increased again.
The Monetary Policy Committee will continue to monitor growth trends and ensure that inflation stabilizes at the target level over the medium term, while also paying close attention to financial stability in conducting monetary policy. While the domestic economy continues to improve with stable inflation, uncertainties related to trade negotiations and the outlook for the semiconductor market have increased. From a financial stability perspective, it is necessary to assess the effects of the government's additional real estate measures and to pay attention to the impact of heightened exchange rate volatility. Therefore, future monetary policy will maintain a stance of rate cuts to mitigate downside risks to growth, but the timing and pace of any further base rate cuts will be determined by closely monitoring changes in domestic and external policy conditions, inflation trends, and the financial stability situation.
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