Korea’s central bank is widely expected to hold its benchmark interest rate at 2.75 percent this week as policymakers weigh currency volatility and household debt pressures.

Market consensus points to a rate freeze at Thursday’s April meeting, as the Korean won faces renewed pressure from escalating trade tensions driven by US President Donald Trump’s tariffs, fueling global market uncertainty.

“Amid rising trade policy uncertainty and growing economic headwinds, the Bank of Korea is expected to hold rates steady in April, balancing concerns over household debt and a weak won while assessing the impact of previous rate cuts,” said Ahn Yae-ha, an analyst at Kiwoom Securities.

The Korean currency was trading at 1,428.3 won per US dollar as of 2:20 p.m., up 21.6 from the previous session’s close of 1,449.9 won, strengthening to the highest in four months since Dec. 6 last year, three days after former President Yoon Suk Yeol declared martial law.

The appreciation of the won has been underpinned by a weaker dollar, driven by escalating tariff tensions under Trump. The US has imposed reciprocal tariffs of up to 125 percent on Chinese electronics and fentanyl-related products, prompting Beijing to respond in kind over the weekend.

Risk sentiment has improved slightly after the US signaled plans to exempt certain electronics from tariffs, but analysts say policy uncertainty continues to weigh on business confidence.

“While a 90-day delay in the US reciprocal tariffs offers a window for negotiation for Korea, the 10 percent baseline tariff and lingering policy unpredictability from the Trump administration remain a drag on market sentiment and business confidence,” Ahn said.

Domestically, inflationary risks remain subdued, but financial stability concerns are increasingly shaping the BOK’s policy direction.

A recent uptick in household debt and rising home prices — especially in Seoul’s Gangnam district—following the early-year lifting of the land transaction permit system, have made the central bank more cautious about additional easing.

Analysts warned that household loan growth, though moderated to 400 billion won in March from 4.2 trillion won in February, could accelerate again as real estate activity picks up in the capital region.

“We think the BOK could maintain an easing bias, keeping rate-cut expectations alive for the coming meetings. In the meantime, the BOK may try to buy time and lean on fiscal policy and government measures to support growth,” said BNP Paribas Korea economist Yoon Jee-ho.

The Ministry of Economy and Finance is expected to put forward a 10 trillion won supplementary budget proposal this week to support exporters and deal with the repercussions of the recent wildfires in southeastern Korea.

Any near-term rate cut by the BOK, however, risks widening the 1.75 percentage point interest rate gap with the US Federal Reserve, potentially spurring further capital outflows and weakening the won.

With global and domestic growth projections trending lower, some economists argue that additional easing may be necessary later this year. The Asian Development Bank recently lowered its 2025 growth forecast for Korea from 2.0 percent to 1.5 percent, while JPMorgan cut its estimate to 0.7 percent from 0.9 percent.

Earlier expectations centered on two rate cuts in the first half of the year, but a third cut in the second half is now seen as increasingly likely — particularly in the event of fiscal support falling short.

By Park Han-na (hnpark@heraldcorp.com)