South Korea Holds Interest Rate at 2.5%, Raises 2026 Growth Forecast

In a widely expected decision, the Monetary Policy Board of the Bank of Korea (BOK) held the key rate unchanged at 2.5 percent in its latest rate-setting meeting in Seoul, reports Yonhap news agency.

It marked the sixth consecutive on-hold decision, even as the central bank remains in an easing cycle.

Since October 2024, the Bank of Korea has cut the benchmark interest rate by a cumulative 100 basis points from 3.5 percent in a bid to bolster economic growth while keeping the level unchanged since May 2025.

The BOK is apparently maintaining a wait-and-see approach as the economy remains on a recovery path, driven by robust exports amid a semiconductor upcycle.

The central bank presented an upbeat outlook for the local economy on the day, raising its 2026 growth forecast by 0.2 percentage point to 2 percent.

A key concern behind Thursday's decision was the unstable property market and rising household debt.

According to earlier data from the Korea Real Estate Board, apartment sale prices in Seoul rose 8.98 percent on-year in 2025, marking the highest growth since 2013, when the board began compiling the relevant data.

Despite the authorities' strengthened regulations to cool the overheated housing market, the average selling price of Seoul apartments has continued to climb, rising 0.15 percent in the second week of February from a week earlier.

President Lee Jae Myung has reiterated his strong commitment to stabilising the real estate market and issued verbal warnings against multi-home owners, saying, "the root of all problems in this country lies in real estate."

The South Korean central bank also raised to 2 per cent its growth forecast for the local economy this year, citing strong exports and a recovery in private consumption.

The revision by the Bank of Korea (BOK) represents a 0.2 percentage-point increase from its previous forecast of a 1.8 percent expansion issued in November.

The revised outlook aligns with the government's growth forecast, while being slightly more optimistic than the 1.9 percent projections by the International Monetary Fund (IMF) and the Korea Development Institute (KDI).

Meanwhile, the BOK revised up its consumer price inflation forecast, increasing this year's estimate to 2.2 percent from 2.1 percent amid rising global oil prices driven by geopolitical risks.

- IANS