Bank of Korea Base Rate in South Korea

The Base Rate is the benchmark interest rate set by the Monetary Policy Board of the Bank of Korea (BoK). It anchors South Korean monetary policy and is the main driver of the won.

The Bank of Korea's board sets the level at its monetary policy meetings (eight a year), with the decision announced the same day. The chosen level stays in force until the next decision.

A hike raises borrowing costs to curb inflation and tends to strengthen the won (KRW); a cut lowers borrowing costs to stimulate the economy and tends to weaken it. The BoK also watches the rate gap with the Fed given its impact on capital flows.

The rate changes only on decision dates (a step function), so the daily series repeats the last level between meetings. Its effect on the economy works with long and variable lags.