South Korea holds rates as it grapples with U.S. tariffs, prepares for snap election

South Korea’s central bank held its policy rate at 2.75% Thursday, as the country grapples with U.S. tariffs and prepares for a snap presidential election.

This was in line with a Reuters poll of economists that forecast the bank to keep rates unchanged.

On Tuesday, South Korea’s Finance Minister Choi Sang-mok reportedly told parliament that the country would seek to delay the implementation of tariffs as long as possible in negotiations with the U.S.

Choi also said this was to help reduce uncertainty that South Korean businesses face in the global markets, Reuters reported.

South Korea has been hit with a 25% tariff on automobiles, as well as on steel and aluminum. South Korea’s Hyundai and Kia are among the top eight best selling brands in the U.S., and the country is the fourth largest exporter of steel to the U.S.

Asia’s fourth-largest economy was also hit with a 25% “reciprocal” tariff by U.S. President Donald Trump, although this has been suspended for 90 days, outside of a 10% baseline tariff.

The move also comes as South Korea goes to the polls to elect a new president on June 3, after Yoon Suk Yeol was removed from office on April 4 over his short-lived martial law declaration in December.

At its last meeting in February, the BOK cut its 2025 growth outlook to 1.5% from 1.9% forecast in November, saying that domestic demand recovery and export growth were likely to be lower than expected due to deteriorating economic sentiment and U.S. tariff policies.

South Korea’s inflation came at 2.1% in March, slightly above the BOK’s 2% inflation target.

The country’s Kospi stock index rose 0.56% after the announcement, while the won weakened 0.58% to trade at 1,422 against the dollar.