Resolving political unrest is crucial for the economy, according to the governor of the Bank of Korea.

Reuters' SEOUL The governor of South Korea's central bank stated on Thursday that the stabilization of the recent political unrest will be the most crucial factor in assessing the state of Asia's fourth-largest economy during the next months.

Previously, U.S. trade and monetary policy was the most significant factor. Furthermore, whether the political process moves forward steadily, as we all desire, over the coming months will be the most significant determinant of the economy, Bank of Korea Governor Rhee Chang-yong stated during a press conference.


After the Bank of Korea surprisingly left policy interest rates stable at 3.00% on Thursday, Rhee stated, "That is why a normalization of the political process is way more important than lowering interest rates a month earlier or later."

This is the first policy change since the nation's largest political crisis in decades was brought on by President Yoon Suk Yeol's attempt to implement martial law in early December. The administration lowered its 2025 economic growth prediction from 2.2% to 1.8% as a result of the unrest.

The decision to keep rates the same, according to Rhee, was made in order to maintain the won, "which in part has been weakening due to political reasons."

However, in reference to the detention of ousted President Yoon, the governor of the central bank stated that the political event on Wednesday gave support to the won.

With almost 3,000 police officers marching on his home, Yoon's arrest—the first of a sitting president—was rather peaceful despite concerns that violence may break out. After an hours-long confrontation between investigators and Yoon's personal protection, an earlier effort to arrest him on January 3 was unsuccessful.


When asked about the won's movements in relation to domestic political unrest, Rhee responded, "The dollar-won exchange rate fell today, thanks to the U.S. inflation report, but what happened yesterday also affected it in a comprehensive manner."

Following the announcement of Yoon's arrest on Wednesday, the won experienced a temporary increase in value.

The currency continued to rise Thursday, reaching 1,449.6 per dollar, its highest level since January 8.

Though it is unlikely to be the last, Yoon's arrest may have closed one chapter in South Korea's political crisis.

As he struggles for political survival, Yoon's counsel further blocked a criminal investigation into whether he committed rebellion with his push for martial law by stating that he has no intention of participating in a second day of questioning on Thursday.