Financial News: Bank Of Korea Holds Policy Rate

Bank Of Korea Holds Policy Rate

(RTTNews) - The Bank of Korea left its benchmark interest rate unchanged on Friday, as policymakers closely monitor rising inflationary pressures and downside risk to growth amid heightened geopolitical tensions. The Monetary Policy Board of the Bank of Korea decided to leave the Base Rate unchanged at 2.50 percent.

The central bank had previously lowered the benchmark rate by a quarter-point each in May and February 2025.

The board observed that domestic economic growth is likely to decelerate more than previously projected, as higher energy prices and supply constraints weigh on the impacts of strong semiconductor exports and the implementation of a supplementary budget. GDP growth is expected to be below 2.0 percent projected in February.

Inflation is forecast to rise to the mid- to upper 2 percent range as upward pressure increases significantly due to increases in global oil prices.

Inflation is expected to exceed notably compared to the February forecast of 2.2 percent this year. Core inflation is also likely to be somewhat higher than the previous forecast of 2.1 percent, the bank said.

Regarding financial stability, the bank said it cautious about the impact of increased exchange rate volatility and it continue to monitor whether a stabilization trend in housing prices in Seoul and its surrounding area and in household debt will be sustained.

"With a new governor arriving in late April, the BoK delivered a carefully calibrated message to leave options open on future policy decisions," ING economist Min Joo Kang said. Nonetheless, the economist said a July hike in policy rate is possible.

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