Bank of Korea Maintains Benchmark Rate for Sixth Straight Meeting
Seoul, February 26: The Bank of Korea kept its benchmark interest rate unchanged at 2.5 percent on Thursday, signaling a cautious approach as policymakers balance stronger economic growth with mounting financial stability concerns.
The decision, taken by the Monetary Policy Board at its latest rate-setting meeting in Seoul, marked the sixth consecutive hold. The move was widely anticipated as the central bank continues its easing cycle while closely monitoring currency pressures and the domestic property market.
Easing Cycle Continues with 100 Basis Points Cut Since October 2024
Since October 2024, the central bank has reduced the benchmark rate by a cumulative 100 basis points from 3.5 percent. The rate cuts were aimed at stimulating economic growth while maintaining overall financial stability.
Despite remaining in an easing phase, the central bank appears to be proceeding carefully, noting that the economy is on a recovery path. Strong export performance, particularly driven by the semiconductor industry, has supported growth momentum.
2026 Growth Forecast Raised to 2%
Alongside the rate decision, the Bank of Korea upgraded its economic outlook. It raised its 2026 growth forecast by 0.2 percentage points to 2 percent.
The central bank also revised its growth projection for this year to 2 percent, up from the 1.8 percent estimate issued in November. The updated outlook aligns with the government’s forecast and is slightly above the 1.9 percent projections by the International Monetary Fund and the Korea Development Institute.
The improved forecast reflects resilient exports and a gradual recovery in private consumption.
Housing Market and Household Debt Remain Key Risks
A central concern behind Thursday’s decision was the continued instability in the housing market and rising household debt levels.
Data from the Korea Real Estate Board showed that apartment sale prices in Seoul climbed 8.98 percent year on year in 2025. This marks the highest growth since 2013, when the board began compiling such data.
Despite strengthened regulatory measures aimed at cooling the housing sector, price pressures remain evident. In the second week of February, the average selling price of Seoul apartments rose 0.15 percent from the previous week.
Government Signals Strong Stance on Property Stability
President Lee Jae Myung has reiterated his commitment to stabilizing the real estate market. He issued verbal warnings to multi home owners and emphasized the need to address structural issues linked to property.
The central bank’s rate hold reflects a broader effort to safeguard financial stability while allowing economic recovery to continue.
Inflation Forecast Edges Higher
In addition to upgrading its growth outlook, the Bank of Korea raised its consumer price inflation forecast for the year to 2.2 percent from 2.1 percent.
The upward revision comes amid rising global oil prices driven by geopolitical risks, adding another layer of complexity to the monetary policy landscape.
With growth showing resilience but housing risks and inflationary pressures lingering, the Bank of Korea appears set to maintain a measured policy stance in the months ahead.
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