- Decision
- Maintain
- Rate change
- 0 bps
- Base rate
- 3%
The Bank of Korea’s Monetary Policy Board unanimously held the Base Rate at 3.00% for the intermeeting period, judging it necessary to assess domestic and external risks and the effects of earlier tightening despite strong growth and persistent inflation pressures. The rate had risen from 2.50% through 25-basis-point increases in July and August. Consumer price inflation reached 2.9% in September and is expected to remain above target for a considerable time as cost pressures persist and demand-side pressures strengthen. Growth in 2026 and 2027 is expected to considerably exceed the August forecasts of 3.3% and 2.9%, respectively, supported by strong semiconductor exports and investment and an accelerating consumption recovery. Household loans declined, although housing-related lending continued to increase. The Korean won strengthened significantly against the US dollar as a large current account surplus supported improved foreign exchange supply-demand conditions. Globally, robust artificial intelligence investment is expected to sustain favorable growth, while higher energy prices and supply constraints keep inflation elevated amid intensified Middle East tensions. The Board maintained its signal of further Base Rate increases, with their timing and pace to depend on inflation, domestic economic developments and financial stability.
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. Stronger-than-expected growth and inflation near target kept policy unchanged in January and February 2026, while the April and May holds reflected uncertainty over the Middle East war’s effects on inflation and growth, even as the Bank of Korea raised its 2026 forecasts in May to 2.6% for growth, 2.7% for consumer price inflation and 2.4% for core inflation.
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. On October 22, 2026, the Bank of Korea held the Base Rate at 3.00% despite strong export- and investment-led growth, inflation around 3% and persistent financial stability risks, judging that growing uncertainty over the Middle East conflict and major economies’ monetary and fiscal policies warranted assessing domestic and external risks and the effects of its two prior hikes, while retaining guidance that the timing and pace of further increases would depend on inflation, domestic economic trends and financial stability.