The central bank said this year's and next year's growth would be considerably higher than its August forecasts and that it will decide the timing and pace of further increases. The Kospi's slide tracked a regional technology selloff.
The Bank of Korea left its base rate at 3.00% on Thursday, as every one of 34 analysts surveyed had expected. The more important message was in the outlook.
The bank said growth this year and next would be "considerably higher" than its August forecasts of 3.3% and 2.9%, and that it would decide "the timing and pace of future increases." In its policy statement, it said inflation "remains high at around 3%, and financial stability risks persist," and that the board would assess the effects of "the two prior rate hikes while maintaining the current level." Consumer prices rose 2.9% in September from a year earlier, the 13th straight month at or above the bank's target.
A hawkish hold on a bad day
The decision landed on a rough day for Korean equities. The Kospi fell 3.5% as chip stocks tracked a regional technology selloff: SK Hynix lost about 5.7% and Samsung Electronics about 4.2%. The won, by contrast, strengthened, with the dollar down 0.5% at 1,319.7 won early in the European morning.
Neither move can be pinned on the central bank. The equity decline matched losses across Asian technology shares after U.S. results reopened questions about the cost of AI spending, and Japanese and Hong Kong stocks fell by similar amounts.
Two readings
One reading is that a November hike is now the base case. Korea's chip-export boom is running hot, growth forecasts are being raised and inflation is at or above target. The bank appears to be among the few in advanced economies still explicitly guiding toward further increases.
The other reading is that Thursday's market shows why the bank may wait. If the AI trade that powers Korea's exports is wobbling, and Brent crude is above $110 for an oil-importing economy, policymakers may prefer to see more data before tightening again.
What to watch
Whether the selloff in Korean chipmakers continues once U.S. markets open; the bank's next policy decision; and Korea's October export data, the cleanest test of whether the growth upgrade holds.