The Bank of Korea (BOK) is widely expected to keep its benchmark interest rate unchanged at 3 percent at its Monetary Policy Board meeting scheduled for Thursday, 18 October, according to a survey of six local economists. All six analysts polled agreed on a pause, while unanimously forecasting a rate hike at the BOK's November meeting.

Why the BOK Is Expected to Pause

Economists argue that the central bank needs breathing room after raising the benchmark rate twice in consecutive meetings in July and August. Three back-to-back hikes, they say, would impose an outsized burden on households and domestic businesses still absorbing the impact of previous tightening.

'Three consecutive rate hikes could place a significant burden on households and domestic companies,' said Joo Won, senior researcher at Hyundai Research Institute. 'It is highly likely that the central bank will pause this time to assess the effects of previous rate hikes.'

Park Seok-gil, an economist at JPMorgan Korea, added that the BOK would scrutinise recent economic indicators carefully. He pointed to core inflation — which strips out volatile food and energy prices — easing to 2.8 percent in September from 3.4 percent the month before. The Korean won hovering around 1,330 won against the US dollar has also helped cushion the effect of elevated oil prices, Park noted.

'Although growth momentum is strong and there is significant room to further raise this year's growth forecast, core inflation has stabilised to some extent and the exchange rate is holding steady in the 1,330 won range, so there is insufficient justification for an additional hike,' said Ahn Jae-kyun, analyst at Korea Investment & Securities Co.

BOK Governor Signals a Pause

BOK Governor Shin Hyun-song appeared to lay the groundwork for a hold during a parliamentary audit last week. 'When we conduct monetary policy, we always assess how much time economic agents need to adapt and evaluate their ability to do so,' Shin said — remarks widely read by analysts as signalling caution on an immediate further move.

Notably, Governor Shin had earlier reaffirmed the central bank's hawkish overall stance, stating: 'Inflation is expected to remain above the target level for a considerable period. We plan to determine the timing and pace of additional hikes while closely monitoring inflation, economic trends and financial stability.' The dual messaging underscores the BOK's difficult balancing act between cooling prices and shielding an economy already under financing pressure.

November Hike Still on the Table

Despite the expected pause, all six economists in the survey forecast the BOK will resume tightening in November. Consumer price inflation is projected to stay well above the central bank's 2 percent target, underpinned by robust semiconductor exports that continue to drive strong growth momentum.

'As growth driven by the semiconductor sector continues and inflationary pressures from high oil prices persist, the trend of interest rate hikes is likely to continue,' said Ahn Ye-ha, senior researcher at Kiwoom Securities Co.

Broader Context

The BOK's current tightening cycle reflects a global pattern of central banks navigating the last mile of inflation — slowing the pace of hikes without signalling an all-clear. South Korea's exposure to global commodity prices and its export-heavy semiconductor industry make the policy calculus especially sensitive to external shocks. This comes amid the US Federal Reserve also remaining in a data-dependent posture, which limits the BOK's room to diverge sharply in either direction.

Thursday's decision will be closely watched for any shift in forward guidance that could either confirm the November hike or push it further out.