Bank of Korea Holds Rate at 2.5% as Tariff Risks Dent Outlook

The Bank of Korea kept its benchmark rate at 2.5 percent on Thursday, marking a second straight pause after four cuts since late 2024. The decision passed 6–1, with board member Shin Sung-hwan pressing for an immediate 25-basis-point reduction. Governor Rhee Chang-yong said the stance balances support for growth with the need to curb household debt and prevent further overheating in the housing market. Alongside the rate decision, the central bank nudged its 2025 growth forecast up to 0.9 percent from 0.8 percent and lifted its inflation outlook to 2.0 percent, citing resilient semiconductor exports and planned fiscal support. Consumer-price growth is expected to ease to 1.9 percent in 2026. The BOK nonetheless warned that the economy faces “significant” headwinds from a 15 percent U.S. tariff on Korean goods and lingering uncertainty around U.S.–China trade talks. Rhee signalled an “easing bias” but said further cuts must be measured to avoid injecting excess liquidity into real estate, where price expectations remain elevated despite slower household loan growth. He added that the bank will closely monitor foreign-exchange volatility, stablecoin developments and potential labour disruptions tied to U.S. supply-chain shifts. The governor reiterated the institution’s policy independence and said earlier reductions are expected to lift output by about 0.24 percentage point.