The BOK monetary policy board’s decision to hold was widely expected, but it was accompanied by a strong dovish tilt and growing acknowledgment of downside risks.“The current uncertainty is unprecedented,” Rhee said, citing escalating US tariffs and volatile global reactions.“The basic scenario is difficult to define, let alone forecast future growth with confidence.”Five of six board members – excluding Rhee – supported holding rates for now, despite belief that a rate cut was warranted on inflation and growth grounds, he said.
NEGATIVE GDP GROWTH POSSIBLE IN Q1The governor flagged a likely sharp downward revision to South Korea’s 2025 growth forecast next month, down from the current 1.5% projection.“We didn’t anticipate large wildfires in the first quarter, nor did we expect the political uncertainty to persist this long,” he said.“Even without factoring in US tariffs, things look worse than expected.”The central bank’s own assessment published on Thursday alongside the rate decision hinted at a possible contraction in the first quarter, stating GDP growth likely undershot the earlier 0.2% forecast for the first quarter, with “a small negative print” now possible, according to the governor.
The Bank of Korea (BOK) left its benchmark interest rate unchanged at 2.75% on Thursday, with Governor Rhee Chang-yong warning that a surge in global uncertainty – exacerbated by abrupt shifts in US trade policy – has thrown the domestic economy into “a dark tunnel.”Speaking at a post-decision press conference, Rhee likened the current economic environment to entering “a tunnel suddenly gone dark,” saying that the central bank would “wait until the light turns on again” before accelerating policy adjustments.
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