Weak Won Keeps Bank of Korea on Hold at 2.5% Despite Growth Upgrade

The Bank of Korea kept its benchmark interest rate unchanged at 2.5 percent on Thursday, 27 November 2025, citing the won's rapid depreciation as a key risk factor for the economy. The decision extended a rate freeze that has been in place since May and marked the central bank's final rate-setting meeting of the year, The Korea Herald reported.

Currency pressure at the centre of the decision

The Bank of Korea said the weakening won was the main reason for extending the freeze. A rate cut now would widen the rate gap with the US Federal Reserve, potentially triggering capital outflows and adding further downward pressure on the currency. The won closed at 1,477.1 per dollar on Monday, its weakest level since April and a seven-month low.

With the currency sliding, the foreign exchange authorities of South Korea — the Bank of Korea, the Finance Ministry, the National Pension Service and the Health Ministry, which supervises the pension fund — held their first four-way meeting on Monday to address the need to stabilize the won. Finance Minister Koo Yun-cheol followed with a press briefing on Wednesday, stressing the urgency of containing foreign exchange volatility.

Housing, household debt and an upgraded growth forecast

Beyond the exchange rate, the central bank also highlighted risks in the overheating housing market and rising household debt as factors behind the decision to keep policy unchanged.

Separately, the Bank of Korea raised its economic growth outlook for 2025 to 1 percent, up 0.1 percentage point from its previous forecast, citing strong exports and resilient domestic consumption.

Key figures and what comes next

• Benchmark rate: 2.5 percent, unchanged since May 2025.
• The won closed at 1,477.1 per dollar on Monday — its weakest level since April.
• The first four-way FX meeting brought together the Bank of Korea, the Finance Ministry, the National Pension Service and the Health Ministry.
• The 2025 growth forecast was raised to 1 percent, up 0.1 percentage point.
• The Bank of Korea also flagged overheating housing and rising household debt as risks.

With Thursday's decision closing the Bank of Korea's rate calendar for the year, markets will now turn their attention to the US Federal Reserve's Federal Open Market Committee meeting scheduled for 9-10 December. The article was written by Im Eun-byel for The Korea Herald.