South Korea's central bank left its policy interest rate unchanged as expected on Thursday, a decision designed to aid a wobbly won as Washington's attempts to reorder global trade by imposing sweeping tariffs threaten to damage economic growth.
The Bank of Korea's seven-member board held its benchmark interest rate (KROCRT=ECI) at 2.75% at its monetary policy review, an outcome expected by 24 of 37 economists polled by Reuters.
Analysts are wagering the BOK will take the benchmark interest rate to 2.25% by the end of the third quarter this year as shifting U.S. tariff policy fuels fears of a global recession and threaten to sap demand for exports out of Asia's fourth-largest economy.
Finance Minister Choi Sang-mok on Tuesday warned of significant downside risks to growth from tariffs and said the government will try to delay the implementation of reciprocal tariffs in negotiations with the United States.
In broad U.S. trade action that has swept up several countries, South Korea was slapped with 25% reciprocal tariffs, which President Donald Trump has since paused for three months.
The reprieve provided some relief to the Korean won which sank to a 16-year low on April 9, a level last seen when markets and policymakers were grappling with the global financial crisis.
Market reaction was muted to the on-hold rate decision, though the won briefly trimmed losses.
The government has plans to negotiate with Washington to lower tariffs and also draft an extra budget spending of 12 trillion won ($8.41 billion) to support the economy as it tries to navigate a political crisis and an uncertain global trade environment.
South Korea holds presidential election on June 3, after former president Yoon Suk Yeol's impeachment stemming from a December martial law declaration was upheld.
"We expect the government to pass a supplementary budget of at least 20 trillion won by year-end, which is likely to add 0.2-0.4 percentage points to growth. However the impact will likely be felt only next year," said Park Chong-hoon, an economist at Standard Chartered Bank of Korea, who correctly predicted BOK's decision on Thursday.
He sees the BOK cutting rates in May "considering the financial volatility caused by Trump's trade policy."
Governor Rhee Chang-yong will hold a news conference at around 0210 GMT, which will be livestreamed via YouTube.
($1 = 1,427.6000 won)
