South Korea maintains interest rates while dealing with U.S. tariffs and gearing up for a sudden election.
The Bank of Korea (BOK) in Seoul on Dec. 28, 2024.
Kim Jae-Hwan | Lightrocket | Getty Images
South Korea’s central bank held its policy rate at 2.75% Thursday, as the country grapples with U.S. tariffs and prepares for a snap presidential election. This decision aligns with a Reuters poll of economists who projected that the bank would maintain rates.
On Tuesday, South Korea’s Finance Minister Choi Sang-mok reportedly informed parliament that the country would strive to postpone the implementation of tariffs as long as possible during negotiations with the U.S. Choi emphasized that this aim was to help alleviate the uncertainty facing South Korean businesses in the global markets, according to reports.
South Korea has been affected by a 25% tariff on automobiles, as well as tariffs on steel and aluminum. Notably, Hyundai and Kia are among the top eight best-selling automotive brands in the U.S., and South Korea ranks as the fourth-largest exporter of steel to the country.
Asia’s fourth-largest economy also faced a 25% “reciprocal” tariff imposed by U.S. President Donald Trump, though this has been temporarily suspended for 90 days, maintaining a 10% baseline tariff.
This development occurs as South Korea prepares for a presidential election on June 3, following the removal of Yoon Suk Yeol from office on April 4 due to his brief declaration of martial law in December.
At its last meeting in February, the BOK revised its 2025 growth outlook to 1.5%, down from the 1.9% forecasted in November, citing that domestic demand recovery and export growth were likely to fall short of expectations amid deteriorating economic sentiment and U.S. tariff policies.
South Korea’s inflation rate reached 2.1% in March, slightly above the BOK’s inflation target of 2%. Following the announcement, the country’s Kospi stock index rose by 0.56%, while the won weakened by 0.58%, trading at 1,422 against the dollar.
