In a recent meeting, South Korea’s central bank decided to keep interest rates unchanged for the fourth time in a row. The decision comes amid a significant drop in the won, which has limited the scope for further rate reductions, indicating that the current cycle of cuts might be approaching its conclusion.

The Bank of Korea’s Monetary Policy Committee opted to maintain the base interest rate at 2.50%. Alongside this, the government has raised its growth and inflation forecasts for the year, now looking at 1.0% growth and 2.1% inflation.

An important change in tone was noted, as the Bank omitted a previous statement about maintaining a rate-cutting stance. Instead, they indicated that the board would evaluate the timing and necessity of any future rate cuts.

While central banks in other Asia-Pacific countries like Japan, Australia, and New Zealand are shifting towards a more hawkish approach, this has led to a decline in December three-year government bond futures.

During a press conference, Governor Lee Chang-yong expressed concern over the ongoing depreciation of the won and the potential for rising prices, saying, “As the won continues to depreciate and people are moving like a crowd, I am worried whether this will lead to a rise in prices.” He also remarked that the broader effects on the domestic economy weren’t completely clear, adding that businesses reliant on domestic demand could face challenges.

The Bank of Korea has already cut rates four times since last year, yet it finds itself in a more complicated situation compared to counterparts like the U.S. Federal Reserve.

With consumption on the rise and the currency weakening, policymakers have limited options for stimulating growth without further inflating prices.

Analysts have adjusted their predictions for the next rate cut, pushing it from late this year to the first quarter of next year, citing increased focus on financial stability concerns stemming from a weaker won and rising housing costs in Seoul.

Ahn Jae-gyun, an economist at Korea Investment Securities, noted that while additional easing can’t be entirely ruled out, further rate cuts seem unlikely at this point. The prevailing expectation is that rates will remain steady for now.

However, he cautioned that premature speculation on rate hikes might not be wise, given the potential for significant economic downturns in the coming quarters that could require intervention.

The won has depreciated nearly 4% this quarter, making it the second-worst performing currency in Asia after the yen, partly due to local investments in U.S. stocks, which President Lee deemed “concerning.”

Real estate prices in Seoul have also been climbing, with apartment prices rising 0.2% in the week ending November 17, presenting further challenges for the central bank as it contemplates easing measures.

On Thursday, President Lee mentioned that only three out of seven board members were in favor of a rate cut in the next three months, a decrease from four members during the last review.

Meanwhile, Finance Minister Koo Yun-cheol revealed that the government had discussions with the National Pension Service, exporters, and securities firms about stabilizing the dollar-won market, although no specific actions were announced.

Looking ahead, the Bank of Korea projects economic growth of 1.8% and inflation of 2.1% by 2026.