The Bank of Korea left its main policy rate unchanged at 3.50 percent at its policy meeting held today, in line with the consensus forecast. Officials have now left this rate on hold for six consecutive meetings after increasing it by a cumulative amount of 275 basis points since late 2021, as part of efforts to return headline inflation to its target level of 2.0 percent.

Since the previous BoK meeting in late August, data have shown headline inflation rose from 2.3 percent in July to 3.4 percent in August and 3.7 percent in September. Core CPI inflation, however, has been steady at 3.3 percent over that period. In the statement accompanying today's decision, officials note that the recent increase in headline inflation largely reflects higher energy and food prices and advise that they expect it to fall over the rest of the year and in 2024. Nevertheless, they note that upside risks to the inflation outlook have increased in response to the recent increase in global oil prices and currency depreciation.

The statement also notes that"domestic economic growth has continued to improve at a modest pace" in response to better export performance. Officials also expect further improvement but noted uncertainties associated with geopolitical risks and the continuation of restrictive policy stances in major economies.

Reflecting their uncertainty about the outlook for both inflation and growth, officials concluded that it remains appropriate to leave policy rates on hold and that their policy stance should remain"restrictive" for"a considerable time". The impact of external risks on domestic inflation and growth will likely be the major focus for policy decisions in coming months.

The Bank of Korea has kept policy unchanged at its last five meetings which is the consensus for the bank's October meeting.

South Korea’s central bank, the Bank of Korea (BoK), announces its monetary policy with regard to interest rates eight times a year. The announcement conveys to the financial markets and investors what, if any, changes in policy might be. The main focus is the target set for the base rate. Policy is framed around keeping the annual rate of inflation as measured by the consumer price index (CPI) at 2 percent over the medium-term.

The Bank of Korea determines interest rate policy at eight meetings during the year. A post-meeting statement is issued after each meeting. The Bank also publishes its Monetary Policy report four times a year and updates economic forecasts twice a year.

Monetary policy goals are to aid and abet solid economic growth along with rising living standards. To achieve these goals, inflation is kept low, stable, and predictable. The Bank has an inflation target at 2 percent over the medium-term. The inflation control target is set by the Bank of Korea in consultation with the government and is reviewed every two years.

The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, few homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the financial markets, while lower interest rates are bullish.