Seoul: South Korea's central bank maintained its benchmark interest rate at 2.5 percent during its latest rate-setting meeting, emphasizing stronger-than-expected economic growth and the need to safeguard financial stability amid currency and housing market challenges.
According to Yonhap News Agency, the Bank of Korea (BOK) has kept the key rate unchanged for the sixth consecutive meeting, despite being in an easing cycle. Since October 2024, the BOK has reduced the rate by a cumulative 100 basis points from 3.5 percent to stimulate economic growth, maintaining this level since May 2025. The bank appears to be adopting a cautious approach as the economy shows signs of recovery, bolstered by robust exports in the semiconductor sector.
The BOK expressed optimism regarding the local economy by increasing its 2026 growth forecast by 0.2 percentage points to 2 percent. However, concerns about an unstable property market and rising household debt influenced Thursday's decision. Previous data from the Korea Real Estate Board indicated an 8.98 percent on-year increase in apartment sale prices in Seoul in 2025, the highest growth since the data was first compiled in 2013.
Efforts to regulate the overheated housing market have not halted the rise in Seoul apartment prices, which increased by 0.15 percent in the second week of February. President Lee Jae Myung has emphasized his commitment to real estate market stabilization, warning multi-home owners about the sector's challenges.
Additionally, the BOK prioritized foreign exchange market stability amid the persistent weakness of the won. Although the local currency has rebounded from a multi-year low of near 1,500 won per U.S. dollar, it remains below the critical 1,400 won level due to supply-demand imbalances. Concerns about further weakening persist, fueled by geopolitical tensions and foreign investors' net selling of domestic stocks.
Experts caution that a rate cut could lead to capital outflows, exacerbating the won's weakness. On Thursday, the Korean won opened at 1,426.3 against the dollar, a slight increase from the previous session. The widening interest rate gap with the U.S., currently at 1.25 percentage points, is another focal point for the BOK, as it could trigger foreign capital outflows, adding further pressure on the won.