The South Korean Won firmed against the US Dollar on Thursday, after the Bank of Korea (BOK) hinted it might pivot towards monetary easing amid a further slowdown in inflation and record household debt levels.
The central bank left its base rate without change at 3.5% at its January policy meeting, in line with market expectations.
This way, borrowing costs were kept on hold for the eighth consecutive meeting.
The central bank has delivered seven rate hikes, or a total of 300 basis points, between April 2022 and January 2023.
“The Bank of Korea is not in any hurry to cut rates, but rising default risks and the potential damage to financial markets may eventually force their hand,” Min Joo Kang, senior economist at ING, was quoted as saying by Reuters.
BOK policy makers said inflation was expected to continue decelerating, but the slowdown could ease because of accumulated cost pressures.
The annual headline consumer inflation is forecast to fluctuate at around 3% for some time, before gradually decelerating to 2.6% later in 2024.
South Korea’s core CPI inflation is expected to remain around 2.3%.
As of 8:25 GMT on Thursday the USD/KRW currency pair was edging down 0.36% to trade at 1,314.45. The Won has rebounded from a one-month low of 1,322.70 per dollar, which it registered yesterday.
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