South Korea Holds Key Rate Steady

The Bank of Korea (BOK) held its base rate at 2.50% in August 2025, marking a second pause after May’s cut, as expected.

Officials highlighted the need to monitor Seoul’s housing market and rising household debt.

Despite stricter housing regulations, property price expectations rebounded in early August before moderating in subsequent weeks.

At the same time, household lending accelerated sharply, with loan balances at major banks rising faster than in July.

Meanwhile, the central bank slightly upgraded its outlook after the US cut planned tariffs on Korean goods to 15% from 25% in exchange for investment pledges from Seoul, while the government boosts fiscal stimulus.

GDP is projected to grow 0.9% in 2025, up from 0.8%, with the 2026 forecast steady at 1.6%.

Inflation is seen at 2.0% this year and 1.9% in 2026, both marginally higher.

Still, officials warned growth remains below potential and further support may be needed.