Seoul: South Korea's central bank again left its benchmark interest rate unchanged Thursday as a weakened won and rising inflation concerns limited room for further easing. In a widely expected decision, the Monetary Policy Board of the Bank of Korea (BOK) held the key rate at 2.5 percent at its rate-setting meeting in Seoul, marking the fifth consecutive on-hold decision since July.

According to Yonhap News Agency, the pause comes despite the central bank remaining in a monetary easing cycle. Since October 2024, the BOK has lowered the benchmark rate by a cumulative 100 basis points from 3.5 percent in an apparent effort to bolster economic growth. The weakened won and the volatility in the foreign exchange market remain major concerns for policymakers.

The won sank to the mid-1,480 won per U.S. dollar range late last month, nearing the lowest level in more than 16 years, but authorities' strong intervention and a series of policy measures had pushed it back to the 1,420 won level. The currency, however, has reversed course since Dec. 30 and fell against the greenback for 10 consecutive trading sessions through Wednesday to be quoted at 1,477.5 won, marking its longest losing streak since 2008, when the country was hit by the global financial crisis.

Under the circumstances, a rate cut could have prompted further capital outflows, thereby exacerbating downward pressure on the local currency, experts say. The weak local currency has also deepened concerns about rising inflationary pressure. Consumer prices rose 2.3 percent from a year earlier in December, remaining above the bank's 2 percent target for the fourth consecutive month.

Import prices rose for a sixth consecutive month last month despite a decline in global oil prices, marking the first such streak since 2021. The BOK also appeared to have opted to take more time to assess the impact of the government's tighter regulations on home purchases in Seoul and the wider metropolitan area, as well as stricter caps on household lending.

The successive measures to cool the overheated housing market have slowed the rise in home prices and the growth of household loans, but there have been signs of a renewed uptick in housing prices. According to the Korea Real Estate Board, the average price of apartments in Seoul rose 0.18 percent in the first week of this month, extending its upward trend for a 48th consecutive week since February 2025.

Government data also showed that home transactions fell sharply in November following the government's Oct. 15 regulations, but apartment transactions in Seoul in December have already surpassed November's level, even though the reporting deadline is not until the end of January. Local analysts earlier noted that the central bank could afford to place greater emphasis on stabilizing the foreign exchange market as the economy remains on a recovery path.

The BOK expects the local economy to grow 1.8 percent this year, up from around 1 percent last year, on the back of strong exports and a recovery in private consumption.