On Thursday, South Korea's central bank decided to keep its policy rate steady at 3%, following two consecutive rate hikes. This decision aligns with analysts' expectations and reflects ongoing concerns about elevated inflation, which has remained above the Bank of Korea's (BOK) target of 2% for 13 months, with a reported rate of 2.9% in September.
President Lee Jae Myung's recent call for an 'all out effort' to enhance housing supply suggests a focus on addressing housing market issues. Despite the pause in rate hikes, analysts from ING believe this does not signal the end of the tightening cycle, as inflation remains a concern and economic growth appears resilient.
South Korea's growth has been significantly bolstered by semiconductor exports, which surged by a record 83.7% year-on-year in September, with semiconductor exports alone increasing by over 262%.
The International Monetary Fund (IMF) has projected South Korea's growth at 3.3% for 2026, following GDP growth rates of 3.8% and 3.7% in the first and second quarters of this year, respectively, both exceeding expectations