SEOUL, Jan. 15 (Xinhua) -- South Korea's central bank on Thursday froze its policy rate for the fifth successive time amid lingering uncertainties such as the increased exchange rate volatility and the still massive household debt.
Bank of Korea (BOK) Governor Rhee Chang-yong and other monetary policymakers decided to leave the benchmark seven-day repurchase rate unchanged at 2.50 percent.
It was in line with market expectations. According to the Korea Financial Investment Association's poll of 100 fixed-income experts, 96 percent predicted the rate on hold this month.
The central bank made the rate freeze decision in July, August, October and November of 2025 after reducing the key rate by 25 basis points in February and May of 2025 and in October and November of 2024.
Rhee told a press conference that all the monetary policymakers agreed to this month's rate freeze decision, saying that five of six policymakers saw a high possibility of keeping the policy rate at 2.50 percent even after three months.
The consecutive rate freeze was attributable to the broadened exchange rate fluctuations and the massive household debt.
The South Korean won versus U.S. dollar exchange rate closed at 1,439.50 won per dollar at the end of 2025, before rising to the mid- to upper 1,400 won range in January.
The BOK said in a statement that the higher exchange rate was driven by the U.S. dollar strength, the Japanese yen weakness, heightened geopolitical risks and continued overseas investment by local residents.
The U.S. Federal Reserve cut its target range for the federal funds rate by a quarter percentage point to 3.50-3.75 percent in December last year, narrowing the rate difference with South Korea to 1.25 percentage points.
If the BOK lowers its policy rate further amid the still wide interest rate gap with the United States, it could trigger a sharp rise in the exchange rate.
Debt owed by households to deposit-taking banks totaled 1,173.6 trillion won (794.2 billion U.S. dollars) at the end of December 2025, down 2.2 trillion won (1.5 billion dollars) from a month earlier.
It marked the first fall in 11 months, but concerns remained about the still massive household debt.
The domestic real estate market fluctuated in recent months, with the number of apartment transactions across the country reaching 35,000 in July, 47,000 in September and 43,000 in November last year.
The government of President Lee Jae Myung unveiled measures in the second half of 2025 to curb housing price increases, but demand remained to purchase new homes with borrowed money, especially in Seoul.
Pressure eased on the central bank to lower rates further thanks to a boom in semiconductor exports and a recovery in consumer sentiment.
The BOK forecast that the Asian country's export was expected to remain favorable due to the strong semiconductor sector while domestic demand was also projected to sustain its improvement trend, led by a continued recovery in consumption.
Export, which accounts for about half of the export-driven economy, grew 3.8 percent to hit a record high of 709.69 billion U.S. dollars in 2025 compared to the previous year.
Semiconductor export soared 22.2 percent to reach a new high of 173.39 billion dollars last year.
The composite consumer sentiment index (CCSI), which gauges the sentiment of consumers over economic situation, fell 2.5 points over the month to 109.9 in December, but it stayed above 100 to indicate that optimists outnumbered pessimists.
Inflation expectations, which measure the outlook among consumers over headline inflation for the next 12 months, stood unchanged at 2.6 percent in December on a monthly basis. ■