South Korea's central bank is leaning towards reducing interest rates this April, even as the national currency hits its weakest point since 2009, as reported by ING THINK. A sluggish economy and disappointing employment data are putting pressure on policymakers to act, though the depreciating won complicates matters.

Trade talks with the United States have just begun, with South Korea managing to engage directly with Washington. Expectations are muted, particularly as the US is pushing for a broad agreement covering military expenditure, energy imports, and direct investment—possibly including involvement in the Alaska LNG pipeline. Any commitments made could be revised after South Korea’s presidential election in June, especially if the opposition Democratic Party wins, given their control of parliament and likely resistance to increased defence or agricultural concessions.

Meanwhile, Korean Treasury Bonds will join the WGBI index, though not until April 2026. This delay, aimed at technical readiness, has nonetheless contributed to further pressure on the won.

Economic growth is expected to remain weak, with 2025 GDP revised down from 1.1% to 0.8%. Despite a temporary boost in exports helping first-quarter growth, domestic demand is soft, and the transition of power following President Yoon’s departure may delay fiscal support.

While market volatility and currency weakness present risks, current conditions differ from earlier in the year when political instability held more sway. Given worsening global and domestic outlooks, the Bank of Korea is more likely to cut rates this month, with any decision also influenced by the US Federal Reserve’s upcoming moves.