The Monetary Policy Board of the Bank of Korea kept the Base Rate unchanged at 2.50 %, judging that surging energy-driven inflation from the Middle East war, a stronger-than-anticipated rebound in activity and persistent housing- and FX-related stability concerns warrant caution until the conflict’s spillovers become clearer. Following a 25 bp cut to 2.50 % in May 2025, the rate has been on hold at every meeting since. April consumer prices accelerated to 2.6 % y/y and are now projected at 2.7 % for 2026 (core 2.4 %), well above February forecasts, while GDP growth is forecast at 2.6 % this year after a robust 1.7 % q/q jump in Q1, powered by semiconductors, exports and a supplementary budget; employment is still rising but the pace has eased. Korean Treasury bond yields have climbed and the won has swung back to about KRW 1,500 per USD amid broad market volatility; Seoul-area house prices and housing-related lending have re-accelerated even as overall household credit growth remains contained. Globally, the Board sees slowing growth yet “considerably” higher inflation as oil and commodity prices spike and supply chains tighten, while AI-related investment and shifting G3 policy outlooks push up bond yields and the dollar. Signalling a hawkish bias, the Board said it “will decide the timing of any rate hikes” based on incoming data; two of seven members already voted for a 25 bp increase to 2.75 %.
Bank of Korea2026-05-28
Bank of Korea keeps Base Rate unchanged at 2.50 %
Bank of Korea’s Monetary Policy Board held the base rate at 2.50 %, citing stronger-than-expected growth, April CPI of 2.6 % and renewed housing, FX and commodity-price pressures. It retained a hawkish bias, stating the timing of any hikes will depend on data, with two of seven members already voting for a 25 bp increase.