Bank of Korea Holds Rate at 2.5% as Board Signals Possible Cut

The Bank of Korea kept its base rate unchanged at 2.5% on Thursday, maintaining the level reached after a quarter-point cut in May. The decision, made unanimously by the monetary policy board, leaves borrowing costs at an almost three-year low as policymakers monitor the fallout from earlier easing and elevated home prices. Governor Rhee Chang-yong told reporters that four of six voting members are open to lowering the rate again within the next three months, while the remaining two favour holding steady. He cautioned that uncertainty over the timing and size of any move is “very high,” and said the board will weigh growth against financial-stability considerations before acting. The central bank expects headline and core inflation to track close to its previous 1.9% projection, keeping consumer-price gains near the 2% target. Officials highlighted heightened risks from rapid household-credit growth and a property boom, and said they will adjust the pace of future easing should those threats intensify. External headwinds also loom. The BOK cited fragile domestic demand, volatile exchange rates and the prospect of additional U.S. trade tariffs as key variables for the outlook. Rhee said the bank will calibrate policy in response to developments in global oil prices, exchange-rate movements and government price-stabilization measures.