- Decision
- Maintain
- Rate change
- 0 bps
- base rate
- 2.5%
The Monetary Policy Board of the Bank of Korea on 27 November 2025 left the Base Rate at 2.50%, judging that a modest pick-up in consumption- and semiconductor-led exports is underpinning growth while headline and core inflation have edged up and exchange-rate and housing-market risks persist. After trimming the policy rate by a cumulative 50 bp in February and May, the Board has held it steady at 2.50% since mid-2025. October consumer price inflation quickened to 2.4% year on year and core inflation to 2.2%, and the bank now forecasts headline CPI at 2.1% in both 2025 and 2026 with core inflation at 1.9% this year and 2.0% next. GDP growth is projected at 1.0% in 2025 and 1.8% in 2026, both upgrades from August, although the outlook remains clouded by uncertainties around global trade, the semiconductor cycle and domestic demand. The KRW has weakened to the mid-to-upper 1,400 per USD range amid residents’ overseas investment and foreign equity outflows, while Korean Treasury yields have risen and household lending has re-accelerated even as Seoul property price gains moderate. Globally, a gradual slowdown linked to U.S. tariff policies, shifting Fed cut expectations and an AI-driven equity correction frame the external backdrop. One Board member favoured a 25 bp cut, and the committee reiterated that it “will keep room for potential rate cuts”, deciding on any future easing only after closely monitoring growth, inflation and financial-stability conditions.
Rate evolution
Since late May 2025, the Bank of Korea lowered the Base Rate by 25 basis points to 2.50% and held it there through May 2026, moving from an initial easing step driven by a sharp growth downgrade, weak domestic demand and slower exports to an extended pause as inflation stayed around 2% and the Board continued to caution about household debt and foreign exchange volatility. As consumption and exports improved, helped by semiconductors and fiscal support, it for a time retained an easing bias but increasingly emphasised housing prices in Seoul and its surrounding areas, household debt, exchange-rate volatility and inflation running somewhat above earlier forecasts, shifting from a rate-cut stance to a data-dependent hold.
In the most recent decisions, stronger-than-expected growth and inflation near target kept policy unchanged in January and February 2026, and the April 2026 hold was framed around the Middle East war as a supply shock that could lift inflation while weakening growth. The Board again left the Base Rate at 2.50% in May 2026 even as it raised its 2026 growth forecast to 2.6% from 2.0% and its consumer price inflation and core inflation forecasts to 2.7% and 2.4% from 2.2% and 2.1%, respectively, citing increased inflationary pressure from the Middle East war, stronger exports, semiconductor-led investment, favourable consumption and financial stability risks, but judging that uncertainty around the conflict and its spillovers warranted staying on hold. On July 16, 2026, the Bank of Korea raised the Base Rate by 25 basis points to 2.75%, judging that growth had strengthened further on exports and investment, inflation was likely to remain above target for a considerable time and financial stability risks persisted, noting that 2026 growth was likely to considerably exceed the May forecast of 2.6% and that June consumer price inflation rose to 3.2% while core inflation held at 2.5%, and signalling a stance consistent with further rate hikes. On August 27, 2026, it raised the Base Rate by another 25 basis points to 3.00%, citing stronger-than-expected growth supported by strong exports and a recovery in domestic demand, inflation expected to remain above target for a considerable time and continued financial stability risks, as it raised its growth forecasts for 2026 and 2027 to 3.3% and 2.9%, kept its consumer price inflation forecasts at 2.7% and 2.3%, and lifted its core inflation forecasts to 2.5% for both years while signalling that the timing and pace of further increases would depend on inflation, domestic economic trends and financial stability.