The Bank of Korea left its main policy rate on hold at 2.50 percent at its policy meeting held today, in line with the consensus forecast. This rate has been cut by a cumulative 100 basis points since last late 2024 but has now been on hold since mid-2025.

In the statement accompanying today's decision, officials noted that core inflation. has been stable around d 2.0 percent in recent months and expressed confidence this stability would continue in the short term. They also expect growth to be solid in 2026, retaining their forecast for GDP to grow by 1.8 percent this year, but noting that risks are skewed to the upside, reflecting strong demand for semiconductor exports.

Although officials previously advised that they are"leaving room for potential rate cuts", in today's statement there is no such guidance about the likely next move in rates. Officials remain cautious about house price growth in the Seoul area and higher household debt and also noted risks associated with exchange rate volatility.

Most forecasters see inflation worries keeping the Bank of Korea on hold this time.

South Korea’s central bank, the Bank of Korea (BoK), announces its monetary policy with regard to interest rates eight times a year. The announcement conveys to the financial markets and investors what, if any, changes in policy might be. The main focus is the target set for the base rate. Policy is framed around keeping the annual rate of inflation as measured by the consumer price index (CPI) at 2 percent over the medium-term.

The Bank of Korea determines interest rate policy at eight meetings during the year. A post-meeting statement is issued after each meeting. The Bank also publishes its Monetary Policy report four times a year and updates economic forecasts twice a year.

Monetary policy goals are to aid and abet solid economic growth along with rising living standards. To achieve these goals, inflation is kept low, stable, and predictable. The Bank has an inflation target at 2 percent over the medium-term. The inflation control target is set by the Bank of Korea in consultation with the government and is reviewed every two years.

The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, few homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the financial markets, while lower interest rates are bullish.