South Korea central bank holds policy rates steady as expected

[SEOUL] South Korea’s central bank kept policy interest rates unchanged on Thursday (Feb 26), as widely expected, as a chip boom in exports and steady inflation allow policymakers more time to assess risks related to financial stability and tariffs.

The Bank of Korea’s seven-member monetary policy board voted to keep its benchmark interest rate unchanged at 2.5 per cent, as expected by all 34 economists polled by Reuters.

It also raised this year’s growth forecast to 2% from 1.8 per cent previously.

The BOK recently signalled a prolonged pause in its easing cycle that began in October 2024 as it navigates currency market volatility and risks from swelling household debt.

The central bank sees Asia’s fourth-largest economy growing significantly faster this year than last year, helped by a chip boom led by Samsung Electronics and SK Hynix, it said in a report on Monday.

That is even as the economy navigates trade uncertainties amid unpredictable shifts in US tariff policies, which could dampen export growth and destabilise key sectors such as automobiles and steel.

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“While market yields are pricing hike possibilities in the next 12 months, we see the case would be likely only if inflation growth jumps above 2.5 per cent with dollar-won (rate) above 1,550,” Lee Seung Hoon, a Seoul-based analyst at Meritz Securities, said. Lee is among the majority expecting rates to stay unchanged this year.

On Wednesday, the benchmark Kospi topped the 6,000-mark for the first time, extending its world-beating rally even after doubling in value in the past year.

Governor Rhee Chang Yong will hold a press conference at 0210 GMT, which will be livestreamed via YouTube. REUTERS