South Korea Interest Rate

The Bank of Korea unanimously kept its base rate unchanged at 2.5% for a fifth consecutive meeting in its first policy decision of 2026, in line with market expectations. The move reinforced signals that the current easing cycle has likely reached an end following a cumulative 100bps since October 2024, as policymakers shifted their focus toward financial stability with the won hovering near 16-year lows. In its latest statement, the BoK removed language on considering further cuts, underscoring caution amid geopolitical risks, capital outflow pressures, and uncertainty over U.S. Federal Reserve policy. Concerns over high household debt levels and exchange-rate volatility also weighed on the latest decision. On the macro outlook, policymakers left inflation forecasts unchanged, projecting headline CPI at 2.1% and core at 2.0% this year, both near target. It also maintained its 2026 GDP growth forecast at 1.8%, pointing to a steady but modest recovery.

The Bank of Korea (BoK) maintained its base rate at 2.50% in November for the fourth consecutive meeting, the final policy session of the year, as expected. The decision came amid concerns about the broader economic outlook, including an overheated housing market and a volatile currency exchange rate. Since October last year, the BoK has cut rates by a cumulative 100 bps to support economic growth. Meanwhile, price pressures slightly accelerated, with headline inflation rising to 2.4% year-on-year in October, the highest level since July 2024 and above the central bank’s 2% target. Q3 GDP grew 1.2% quarter-on-quarter, marking the strongest expansion in over a year. The central bank revised its GDP growth forecast for 2025 to 1.0%, up from 0.9%, while the 2026 forecast was revised to 1.8% from 1.6%. The headline inflation forecast for 2025 was raised to 2.1%, and the same forecast applies for 2026. Core inflation forecasts remained at 1.9% for 2025 and were revised to 2.0% for 2026.

The Bank of Korea maintained its base rate at 2.50% in October for the third consecutive meeting but implied that more easing is on the way. The decision came amid concerns over a broader economic outlook including a persistent property market slump, sluggish export demand, and the implementation of stricter fiscal policies. At the same time, inflationary pressures have eased, with headline inflation slowing to 2.1% year-over-year in September, nearly aligning with the central bank’s 2% target. The BoK its GDP growth forecast at 0.9% for 2025 and 1.6% for 2026, mainly driven by domestic consumption. Meanwhile, although exports are expected to remain resilient for some time, supported by strength in the semiconductor sector, the impact of US tariffs on Korean exports is likely to expand gradually. The BOK also kept its projections for headline inflation at 2.0% for this year and 1.9% for 2026, while core inflation is expected to remain at 1.9% for both years.