BOK Members' Concerns: Rate Cut and Won Stability

The Bank of Korea (BOK) has expressed concerns that a rate cut could weaken the South Korean won, according to minutes from its latest meeting. The central bank's members are grappling with the delicate balance between supporting economic growth and maintaining price stability, with the exchange rate playing a crucial role in both objectives.



The BOK has been monitoring the won's depreciation, which has accelerated since November 2025, driven by market expectations of higher inflation and interest rates in the United States following Donald Trump's re-election. The won's decline has intensified pressure on import prices, threatening to stoke inflation even as the domestic economy shows signs of stagnation. The BOK has warned that a further depreciation of the won could exert upward pressure on inflation, highlighting the importance of exchange rate stability for maintaining price stability.



The BOK's decision to maintain the base rate at 3.00% reflects its commitment to balancing the concerns of economic growth and price stability. A rate cut could provide a much-needed boost to the economy, but it could also lead to a further depreciation of the won, exacerbating inflationary pressures and potentially destabilizing the economy. The BOK has emphasized the need to monitor the situation closely, as the economic outlook and foreign exchange market uncertainties have increased due to the changing domestic political situation and economic policies in major countries.

The BOK's concerns regarding the won's stability align with its mandate to maintain price stability and support economic growth. A stable exchange rate is crucial for controlling inflation, supporting economic growth, and maintaining financial stability. The central bank's decision to maintain the base rate at 3.00% demonstrates its commitment to fulfilling its mandate, even in the face of political uncertainty and economic headwinds.

In conclusion, the BOK's concerns about the potential impact of a rate cut on the won's stability highlight the delicate balance between supporting economic growth and maintaining price stability. The central bank's decision to maintain the base rate at 3.00% reflects its commitment to fulfilling its mandate, even in the face of political uncertainty and economic headwinds. The BOK will continue to monitor the situation closely, as the economic outlook and foreign exchange market uncertainties remain fluid and dynamic.