With the hold fully priced, attention shifts to Governor Shin’s news conference at 02:10 GMT for guidance on whether November remains live. A clear signal that the pause is temporary would likely support the won and push short-dated Korean government bond yields higher. A softer emphasis on monitoring the impact of past hikes could weigh on the currency. The board’s caution over recent stock market volatility suggests policymakers are wary of adding pressure to equities, which may offer some relief for the KOSPI. Chipmakers remain at the centre of the growth story given record AI-driven exports. Energy prices are a key upside risk to inflation for Korea as a major oil importer. That leaves the outlook sensitive to any escalation in the Middle East that lifts crude.

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Earlier (preview):

• Bank of Korea expected to hold rates today after two hikes, tightening cycle seen intact

---The Bank of Korea has stopped to catch its breath rather than end its tightening, with record chip exports and sticky inflation keeping a November hike firmly in view.

Summary:

• The Bank of Korea held its seven-day repo rate at 3.00%, as forecast by all 34 analysts in a Reuters poll
• The decision follows quarter-point hikes in July and August, the central bank’s first consecutive increases in more than three years
• Governor Shin Hyun Song has said policy will remain restrictive until inflation returns to target
• Headline inflation slowed to 2.9% in September from 3.1% in August, still above the 2% target
• Exports for January to September topped $800 billion for the first time, driven by global AI spending
• The median forecast in the Reuters survey sees a hike to 3.25% in November, in line with the central bank’s dot plot

The Bank of Korea left its benchmark interest rate unchanged on Thursday, pausing after back-to-back quarter-point hikes, though strong chip-driven growth and above-target inflation keep further tightening on the table.

The seven-member monetary policy board voted to hold the seven-day repurchase rate at 3.00%, Reuters reported, a decision forecast by all 34 analysts in its survey. The central bank raised rates in July and August, its first consecutive increases in more than three years. Governor Shin Hyun Song said afterward that a gradual pace of tightening was preferred.

Shin reiterated at an International Monetary Fund event on October 13 that policy will stay restrictive until inflation converges with the central bank’s target. Analysts said ahead of the meeting that a pause would slow the pace of tightening and soften its hawkish intensity. They noted the central bank had committed to monitoring the effects of its back-to-back hikes, and that recent market volatility, particularly in equities, made a hawkish decision less likely.

Headline consumer inflation slowed to 2.9% in September from 3.1% in August but remains above the Bank of Korea’s 2% target. Growth is being driven by exports, which are benefiting from global spending on artificial intelligence. Shipments for January to September exceeded $800 billion for the first time on record, underscoring the strength of South Korea’s semiconductor sector.

With growth expected to stay firm and inflation above target, the median forecast in the Reuters survey points to a hike to 3.25% at the Bank of Korea’s November meeting. That would be in line with the central bank’s own dot plot projection, which sets out policymakers’ expected path for rates.

The decision means the pause is likely to be read as a change in pace rather than direction. Markets will look to Shin’s news conference, due at 02:10 GMT, for signals on whether policymakers see a November hike as the most likely next step, and how they weigh firm growth and inflation against recent financial market volatility. 

This article was written by Eamonn Sheridan at investinglive.com.

Source: Investing Live - Central Bank