Bank of Korea Holds Rate as Majority Signals Cut Within Months

The Bank of Korea left its policy rate unchanged at its meeting on 28 August, but Governor Rhee said the decision was not unanimous. Board member Shin Sung-hwan argued for an immediate cut to shore up growth, while five of the six board members signalled they would back a reduction within the next three months. Despite the easing bias, the central bank pledged to maintain caution over exchange-rate volatility and other financial-stability risks. Rhee said rapid rate cuts could overheat the property market and stressed that monetary policy remains independent, though it will seek to align with government efforts to curb housing-price instability. The BOK slightly upgraded its economic outlook, raising its 2025 gross domestic product growth forecast to 0.9% from the 0.8% projected in May, and keeping its 2026 estimate at 1.6%. It also lifted its 2025 consumer-price inflation forecast to 2.0% from 1.9%, while projecting 1.9% for 2026. Rhee noted that the four rate reductions already delivered since early 2024 are expected to add about 0.24 percentage point to growth, yet he warned the output gap will widen into early 2026 before narrowing. He sees no immediate liquidity concerns but said the bank will continue monitoring domestic and global policy shifts that could affect financial conditions.