South Korea Interest Rate

Bank of Korea governor nominee Shin Hyun-song on Wednesday pledged to prioritize price stability as South Korea faces rising inflation risks and growth uncertainty linked to the Middle East conflict. At his confirmation hearing, Shin highlighted mounting price pressures and downside risks to growth, promising to balance inflation control, financial stability, and steady expansion. He cautioned inflation could climb in the coming months on higher oil prices and a weaker won, while growth may undershoot forecasts. “Given South Korea’s sensitivity to oil prices, I will place greater emphasis on price stability,” he said. Shin is set to succeed Rhee Chang-yong on April 20, ahead of the May rate decision, but offered no policy guidance. He noted direction will hinge on Middle East developments, with supply risks around the Strait of Hormuz.

The Bank of Korea (BoK) held its policy interest rate steady at 2.5% for the seventh consecutive meeting in April 2026, in line with market expectations, as policymakers assessed the impact of the Iran war on domestic cost pressures and GDP growth. The decision came amid rising inflation and heightened volatility in financial and foreign exchange markets. Annual inflation accelerated to 2.2% in March 2026, up from 2.0% in the previous two months, marking the highest reading since last December and surpassing the central bank’s 2% target. Looking ahead, inflation is expected to rise to the mid- to upper-2% range due to a surge in global oil prices. CPI for this year is expected to exceed the February forecast of 2.2%, while core inflation is also likely to be somewhat higher than the previous forecast of 2.1%. Meanwhile, the growth rate for this year is expected to be below the February forecast of 2.0%.

The Bank of Korea held its policy interest rate steady at 2.5% for the sixth consecutive meeting in February 2026, continuing its extended pause in the easing cycle in line with market expectations. The unanimous decision reflects policymakers’ confidence in ongoing support from the chip sector and stable inflation, giving the BOK more time to assess financial stability risks while reducing the economy’s need for additional stimulus. Officials are also keeping an eye on the won’s weakness against the dollar and the potential for lower borrowing costs to drive up household debt. Since October 2024, the central bank has cut its benchmark interest rate by a total of 100 basis points to 2.5%, to support economic growth, keeping the rate unchanged since May 2025. On the macroeconomic front, the central bank revised up its GDP growth forecast to 2% in 2026 from the previous projection of 1.8%, while the average inflation rate is now expected at 2.2% from the prior 2.1% estimate.