Korea's Policy Rate Has Not Moved Since May 2025. Deposit Rates Have.
A familiar reason for postponing a deposit: rates are about to be cut, so locking in now would be a mistake. Or the reverse, that a hike is coming and waiting pays. Both assume the policy rate and the rate your bank offers move together. Bank of Korea data lets us test how well that assumption holds.
Policy rates and deposit rates broadly travel in the same direction but do not move together. From January 2023 to September 2024, with the policy rate pinned at 3.5%, the average 1-year time deposit rate moved -0.76 percentage points. Since May 2025 the policy rate has sat at 2.5%, yet deposit rates bottomed at 2.51% in August 2025 and have since climbed to 3.26%, a move of +0.75 points. Timing a deposit off policy headlines is less reliable than simply reading today’s published rates.
Two different numbers
Start with the terminology. The policy rate is set by the Bank of Korea’s Monetary Policy Board and makes the headlines. The rate credited to your account is set by each bank individually.
The policy rate influences what it costs banks to fund themselves, which is why the two broadly track. But a bank pricing a deposit is not looking only at the policy rate. It is looking at how much funding it needs, how fast its loan book is growing, what it would cost to raise money in the bond market, and what competitors are offering.
So the two numbers travel together without overlapping. Here is what the Bank of Korea actually recorded.
The last 42 months
| Month | Policy rate | Average 1-year time deposit rate | Difference |
|---|---|---|---|
| January 2023 | 3.5% | 4.15% | +0.65 pp |
| January 2024 | 3.5% | 3.65% | +0.15 pp |
| October 2024 | 3.25% | 3.37% | +0.12 pp |
| February 2025 | 2.75% | 2.98% | +0.23 pp |
| May 2025 | 2.5% | 2.64% | +0.14 pp |
| August 2025 | 2.5% | 2.51% | +0.01 pp |
| March 2026 | 2.5% | 2.93% | +0.43 pp |
| June 2026 | 2.5% | 3.26% | +0.76 pp |
The policy rate is the Bank of Korea base rate. The deposit figure is the weighted average rate on newly contracted 1-year time deposits at domestic banks, so it reflects deals actually struck that month rather than any single advertised product. Bank of Korea Economic Statistics System, January 2023 to June 2026.
The right-hand column keeps changing. There were months when deposits paid less than the policy rate, and today they pay 0.76 points more. A spread that will not sit still is a spread you cannot forecast from the policy rate alone.
Deposit rates moved while the policy rate stood still
Splitting the series into periods makes it clearer.
| Period | Policy rate | Average 1-year deposit rate | Change |
|---|---|---|---|
| January 2023 to September 2024 | Held at 3.5% | 4.15% to 3.39% | -0.76 pp |
| September 2024 to May 2025 | Cut from 3.5% to 2.5% | 3.39% to 2.64% | -0.75 pp |
| May 2025 to June 2026 | Held at 2.5% | 2.64% to 3.26% | +0.62 pp |
Comparing the first and last month of each period.
The first row is the interesting one. Across 21 months in which the policy rate never changed, average deposit rates fell 0.76 percentage points. Policy stood still while market pricing kept sliding.
The middle row behaves as the folk wisdom predicts. The policy rate came down 1.00 points and deposit rates followed with 0.75. Judged on this period alone, the two do move together.
The last row is the present. The policy rate has been held at 2.5% for 14 months. Deposit rates bottomed at 2.51% in August 2025 and have since risen to 3.26%, +0.75 points off the low. Anyone waiting for a policy signal before committing missed that entire move.
Why they diverge
No single explanation covers it, and banks do not publish their reasoning. Several structural factors are well established, however.
How much funding the bank needs
A growing loan book has to be funded, and deposits are one way to fund it. When that pressure is on, banks raise deposit rates to compete regardless of where policy sits. When they are flush, there is no reason to pay up.
Deposits are not the only funding source
Banks also issue bonds. Cheap bond market funding reduces the need to bid for deposits; expensive funding pushes them back toward depositors. That channel moves on its own schedule.
Policy decisions are priced in early
Monetary Policy Board decisions rarely arrive as surprises. Markets position ahead of them, so by announcement day much of the move is already embedded in pricing. That is why deposit rates so often do nothing on the day itself.
So when should you commit
Do not time it off policy headlines
As the data shows, a static policy rate is entirely compatible with deposit rates moving in either direction. Rushing in ahead of an expected cut, or waiting for an expected hike, rests on a weaker foundation than it appears. Reading the rates published on the day you decide is more reliable.
Price the cost of waiting
Every month of delay forgoes a month of interest. On KRW 50,000,000 at 3.26%, one month is roughly KRW 135,833 before tax. Ask whether the rate improvement you are waiting for is worth more than that.
Ladder maturities to blunt timing risk
Splitting a lump sum across different terms means no single decision date determines the outcome. If rates rise, the shorter tranche matures into them. If they fall, the longer tranche has locked today’s level in.
TIP. The deposit figures above are averages across all domestic banks, and the dispersion within any month is wide. Use the average to read direction, then pick the actual product from the disclosure, where above-average rates are usually available.
Frequently asked questions
If the Bank of Korea cuts rates, will my deposit rate fall?
Not necessarily. Over the 21 months the policy rate was held at 3.5%, average deposit rates moved -0.76 percentage points, and over the current hold at 2.5% they moved +0.62 points.
What is the current policy rate in Korea?
2.5%, unchanged since May 2025. The average 1-year time deposit rate at domestic banks was 3.26% in June 2026.
Should I open a deposit quickly if a rate cut is expected?
Timing a deposit on a policy forecast is weak ground. Markets price decisions in advance, and deposit rates have moved in both directions during periods when policy did not move at all.
Where can I check average deposit rates?
The Bank of Korea Economic Statistics System publishes weighted average deposit rates at domestic banks. These are averages of contracts actually struck, so they differ from individual product rates.
How do I find rates above the average?
Sort the Financial Supervisory Service comparison disclosure by term and opening method. Dispersion between institutions is wide enough that above-average products almost always exist.