South Korea Holds Interest Rate Steady to Shield Currency Amid Global Trade Uncertainty - عرب فايف

The Bank of Korea decided on Thursday to keep its key interest rate unchanged at 2.75%, aiming to support the local currency (the won) amid increasing volatility in global markets and rising uncertainty over U.S. trade policy.

This decision follows a 25-basis-point rate cut in February, which marked the third reduction since October 2024, when the central bank initiated its first monetary easing cycle since August 2021.

By maintaining the current rate, the Bank of Korea signaled its focus on financial stability, balancing the need to support economic growth with the protection of markets. Recent fluctuations in financial and foreign exchange markets have been largely driven by unexpected tariff measures announced by the administration of U.S. President Donald Trump.

Earlier this month, the Korean won plunged to its lowest level against the U.S. dollar in nearly 16 years, hitting 1,484.1 won, after Washington imposed a 25% “reciprocal” tariff on South Korean goods, alongside a 10% base tariff on all foreign imports. However, in a surprising reversal, President Trump announced a 90-day suspension of the reciprocal tariffs, allowing the won to recover to around 1,420 won, its strongest level this year.

Experts have expressed concern over the interest rate gap between South Korea and the U.S., which currently stands at 1.75 percentage points. A widening gap could further pressure the Korean currency and increase capital outflows.

The decision to hold rates appears to be a strategic move by the Bank of Korea to preserve policy flexibility, as South Korea prepares for trade negotiations with Washington. President Trump has instructed his administration to begin immediate tariff talks with South Korea and other key partners.

Finance Minister Choi Sang-mok is scheduled to meet with U.S. Treasury Secretary Scott Besant next week to discuss tariff issues and other trade matters.

On Thursday, the won opened at 1,416.0 per dollar, up 10.7 won from the previous session, according to South Korea’s Yonhap News Agency.