The BOK has already lowered the rate twice this year, following two cuts in the final quarter of last year. The central bank is wary of encouraging another post-pandemic-style housing rally by easing policy too quickly, a factor that may have swayed board members. Seoul apartment prices rose 3.5% in the first half of this year, according to the Korea Real Estate Board.
Still, surveyed economists expect the next rate cut to come next month before the central bank takes a longer time out on easing policy further.“An August cut still seems likely, partly due to the need for policy coordination following fiscal expansion,” Kong Dongrak, an economist at Daishin Securities Co., said by phone.
The won pared earlier gains against the dollar to be largely flat against the dollar following the decision. The yield on the nation’s 3-year government bond continued to decline, falling about 2 basis points to 2.46%.
Thursday’s decision suggests that BOK board members are cautious about easing too quickly, fearing it could add to household debt, and prefer to wait for greater clarity on key trade risks for the economy and government moves on property market regulations before resuming cuts.
One of the most pressing challenges for South Korea’s economy is navigating the impact of US tariffs. Along with other nations, Seoul has been granted more time to negotiate before Washington’s across-the-board tariffs on Korean goods are scheduled to rise back to 25% on Aug.
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