Bank of Korea keeps Base Rate unchanged at 2.50%

The Monetary Policy Board of the Bank of Korea on 26 February 2026 kept its Base Rate unchanged at 2.50 %, judging that consumer price inflation is likely to hover near target while economic activity strengthens and financial-stability risks persist. After a 25 bp cut in May 2025 from 2.75 % to 2.50 %, the Board has maintained this level at every meeting since. Inflation eased to 2.0 % y/y in January, and headline and core CPI are now projected at 2.2 % and 2.1 % for 2026, both 0.1 pp above November’s forecasts, with the trajectory seen depending on oil prices, the exchange rate and government price measures. GDP growth is expected at 2.0 % this year, up from the prior 1.8 % estimate, as consumption revives, semiconductor-led exports accelerate and employment in services continues to expand, although construction investment remains weak. In markets, the KRW/USD rate has been volatile—recently retreating after swings driven by residents’ overseas investment and foreign equity outflows—while Korean Treasury yields spiked on diminished rate-cut bets before partially reversing; household loan growth is subdued and Seoul-area house-price gains have moderated. Globally, solid AI-related investment and expansionary fiscal policies underpin “favourable” growth even as U.S. tariff uncertainty, shifting Fed expectations and geopolitical risks cloud the outlook. The Board reiterated its intention to support the recovery while vigilantly monitoring inflation dynamics, property prices, ho