Bank of Korea (BOK) Governor Rhee Chang-yong speaks during a press conference at its headquaters in central Seoul, Friday, after the BOK kept the rate steady at 3.5 percent. Yonhap

Bank of Korea (BOK) Governor Rhee Chang-yong said Friday that the BOK will sustain its restrictive monetary policy, putting aside the widely held expectations that the central bank may begin cutting the rate in the second half of the year.

His remark came after the central bank kept its benchmark interest rate steady at 3.5 percent for the 10th time in a row since January 2023, as the growth rate of consumer prices remains above 3 percent against the BOK's target range of 2 percent.

"All members of the monetary policy board, including myself, reckon that time has yet to come to make a call on the possibility of a rate cut for the second half," he said during a press conference after the six-member board's decision on a rate freeze.

"We had a consensus that there should be more progress concerning inflation slowdown for us to be convinced and move toward a rate cut," he said, adding that the BOK until then "will keep its restrictive monetary policy stance for a sufficient period of time."

The current policy rate stands at its highest level in more than 15 years, with more households taking brunt of costly borrowing rates, decline in real wages and other economic difficulties related to inflation.

Whether the BOK will lower the current base rate in the second half drew market attention as the U.S. Federal Reserve hinted at three rate cuts in 2024 in its announcement to shift toward dovish monetary policy in December 2023.

It was widely expected that the Fed's first rate cut will come in June.

Inflation in Korea, however, remains unstable, complicating the possibility of the BOK's rate cut.

According to Statistics Korea, year-on-year inflation increased by 3.1 percent in February and again in March, after growing 2.8 percent in January.

The January reading then fueled optimism for the BOK's rate cut as inflation eased below the 3 percent range for the first time in six months.

Concerning the resurgence in inflation, the high prices of apples and other fresh produce were increasingly attributed to upward pressure.

Asked whether the prices of the fresh produce can be settled via monetary policy, Rhee said they are "not something that the BOK's rate can resolve."

He pointed out climate change is behind a decline in the amount of domestically produced fresh food and hikes in their prices.

As a possible solution, Rhee suggested importing fresh produce, which is restricted to protect farming and other relevant industries here.

Upward inflationary pressure is also aggravated by higher global oil prices due to geopolitical risks.

Plus, whether the Fed will go ahead with its rate-cut plan is now uncertain, as year-on-year U.S. inflation accelerated from 3.2 percent in February to 3.5 percent in March.

Concerning the recent rise in the won-dollar exchange rate above the psychologically important 1,350 won level, Rhee said the BOK is monitoring whether the won's recent declines are excessive.