▲ Bank of Korea (BOK) Gov. Shin Hyun-song bangs the gavel during the BOK Monetary Policy Board meeting at the central bank's headquarters in Seoul on Oct. 22, 2026. (Pool photo) (Yonhap)
▲ Bank of Korea (BOK) Gov. Shin Hyun-song (C) chairs the BOK Monetary Policy Board meeting at the central bank's headquarters in Seoul on Oct. 22, 2026. (Pool photo) (Yonhap)

(ATTN: UPDATES with BOK's statement in paras 6-7, 15-17; CHANGES photo)

By Kim Boram

SEOUL, Oct. 22 (Yonhap) -- The Bank of Korea (BOK) kept its benchmark interest rate unchanged Thursday following two consecutive rate hikes to tame accelerating inflation amid protracting Middle East tensions and robust exports.

In a widely anticipated decision, the BOK's Monetary Policy Board held the key rate steady at 3 percent in its rate-setting meeting.

The rate freeze came after the BOK raised the benchmark rate in its July and August meetings, citing "preemptive action" to curb mounting inflationary pressure and ensure macroeconomic stability.

The earlier decisions marked the first back-to-back rate hikes since January 2023, when the central bank raised the rate at seven consecutive meetings starting in April 2022.

The central bank paused its tightening cycle amid concerns that higher borrowing costs could place greater financial burden on lower-income households.

"Given the growing uncertainties surrounding the Middle East conflict and monetary and fiscal policies in major economies, the board judged that it would be necessary to assess developments in both domestic and external risk factors and the effects of the two prior rate hikes while maintaining the current level of the base rate," the board said in a statement.

It said all seven board members supported the rate freeze.

However, the BOK has signaled it will maintain a hawkish stance for the time being amid inflationary pressures from rising oil prices and renewed uncertainty in the Middle East, as well as a stronger-than-expected economic recovery.

Consumer prices have hovered around the 3 percent level in recent months, rising 2.8 percent in July, 3.1 percent in August and 2.9 percent in September.

Inflation is expected to remain at a similar level in October amid rising oil prices linked to escalating military tensions in the Middle East.

BOK Gov. Shin Hyun-song has said the central bank will continue tightening monetary policy until inflation is firmly on track to reach its 2 percent target.

Solid economic growth has also supported the BOK's hawkish stance, with Asia's fourth-largest economy expanding 1.8 percent in the first quarter and 0.6 percent in the second quarter.

The country's current account surplus reached US$279.2 billion in the first eight months of the year, more than quadrupling from the same period last year.

The BOK raised its 2026 growth forecast to 3.3 percent from 2.6 percent in August, suggesting the economy could expand by as much as 3.6 percent, supported by robust semiconductor exports amid strong demand for artificial intelligence (AI) infrastructure.

"Going forward, exports and investment are expected to sustain their high growth, driven by a strong semiconductor sector, while the recovery in consumption is likely to gradually accelerate, supported by improving income conditions," the central bank said.

"The growth rates for this year and next year are expected to be considerably higher than the August forecasts of 3.3 percent and 2.9 percent, respectively."

It said it will decide the timing and pace of further rate hikes, while assessing trends in inflation and the domestic economy, and financial stability.

Market experts expect the BOK to deliver another rate hike at its next policy meeting, scheduled for Nov. 26.

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