By Cynthia Kim and Jihoon Lee

SEOUL (Reuters) – South Korea’s central bank unexpectedly left its policy interest rate unchanged on Thursday, weighing the impact of back-to-back cuts last year while supporting a win that weakened in 15-year low against the US dollar recently. week.

Six of the bank’s seven board members said the Bank of Korea should be open to rate cuts in the next three months, Governor Rhee Chang-yong said at a news conference after the board held a policy review and decided to keep the benchmark interest rate unchanged. at 3.00%.

Only seven of 34 economists polled by Reuters forecast no change in rate levels, while the remaining 27 expected a third consecutive 25 basis-point cut, which would have been first time since 2009 that it has snapped three consecutive meetings.

The decision is the first since impeached President Yoon Suk Yeol’s attempt to impose martial law in early December plunged Asia’s fourth-largest economy into its biggest political crisis in decades. The turmoil prompted the government to cut its 2025 economic growth forecast to 1.8% from 2.2%.

The crash of Jeju Air flight 7C2216, which killed 179 people in the country’s deadliest air disaster, also weighed heavily on the economy.

The slide in victory is a major concern for policy makers. In the last three months of 2024, the currency weakened 10.6% against the dollar, the largest quarterly drop since the third quarter of 2008.

Governor Rhee said the rate decision reflects the need to support the winner “which is partly weakening because of political reasons.”

“We will be able to make a more independent decision from US monetary policies to cut policy rates once (domestic) political conflicts stabilize somewhat,” said Rhee, adding that currency authorities are conducting smoothing operations to support the victory.

Local currency dealers said that aside from streamlining operations in the onshore dollar-won market, South Korea is also relying on the currency hedging operations of the National Pension Service to support the win.

South Korea’s policy-sensitive 3-year treasury bond futures sharply trimmed earlier gains after the rate decision. The victory was initially gained against the dollar, but then pulled back.

In a statement released shortly after its policy decision, the central bank said it expected economic growth in 2025 to be slower than the 1.9% it previously projected due to weaker exports. and worsening consumer sentiment.

“High exchange rates may increase pressure (on consumer prices), and the uncertainties that have increased related to world oil prices as well as economic growth at home and in out of the country,” he said in the statement.

Economists see the central bank eyeing a slower pace of interest rate cuts in the coming year.

“It seems that the Bank of Korea has also been forced to hold rates today by headlines of ‘three consecutive rate cuts’. The stance of its monetary easing policy remains intact, and the reaction the market still seems to indicate a rate cut next month,” said Daishin Securities economist Kong Dong-rak.

Median forecasts in a Reuters poll pointed to a cut in interest rates of 25 basis points this quarter and cuts of the same degree in the second and third quarters taking the rate to 2.25%.