Bank of Korea board members express concern that weaker won could fuel financial market instability

Minutes from the latest meeting of the Bank of Korea revealed that most members of the Monetary Policy Board (Bank of Korea) expressed significant concern that a weaker won could fuel financial market instability. During the first policy meeting of the year held on January 15, the board voted to keep the benchmark interest rate unchanged at 2.50 percent. This decision underscored a collective commitment to prioritizing financial stability over further monetary easing at this time.

The documented discussions show that policymakers are actively navigating challenges presented by currency market volatility and the risks associated with the household sector (household debt), particularly regarding swelling household debt. By maintaining the current interest rate, the Bank of Korea has signaled a continued pause in its easing cycle. Most board members echoed the sentiment that the potential for a weaker currency to disrupt financial markets requires a cautious and measured policy response.