Bank of Korea Holds Rates Amid Trade Tariff Threats and Weakening Won

South Korea’s central bank kept its key interest rate steady at 2.75% on Thursday, aiming to stabilize the Korean won as global trade tensions escalate. The decision by the Bank of Korea (BOK) aligns with expectations from 24 of 37 economists surveyed by Reuters. Analysts now predict a rate cut to 2.25% by Q3 as U.S. tariff threats raise recession fears and dampen export outlooks for Asia’s fourth-largest economy.

The won briefly recovered some ground after the rate announcement but remains under pressure, having hit a 16-year low on April 9—levels last seen during the 2008 financial crisis. The market reaction was largely muted following the central bank’s policy review.

President Donald Trump’s sweeping tariff campaign, which includes a 25% levy on South Korean imports, has temporarily paused for three months, offering only brief respite. Finance Minister Choi Sang-mok noted the downside risks to growth and emphasized ongoing efforts to delay reciprocal tariffs through negotiations with Washington.

To cushion the economy, the Korean government is also preparing a supplementary budget worth 12 trillion won ($8.41 billion), with expectations of an additional 20 trillion won package by year-end. Standard Chartered economist Park Chong-hoon forecasts this spending could boost growth by 0.2–0.4 percentage points, though its effects may not be felt until 2026.

With South Korea’s presidential election set for June 3 following former President Yoon Suk Yeol’s impeachment, the nation faces both political and economic uncertainty. Park also expects the BOK to cut rates as early as May due to market volatility linked to U.S. trade policies.

BOK Governor Rhee Chang-yong will address the public in a livestreamed press conference on Thursday at 0210 GMT.