The Bank of Korea (BOK) held its key interest rate steady on Thursday, prioritizing financial stability amidst concerns about a weak Korean won and an unstable housing market, while acknowledging stronger-than-expected economic growth.
In a widely anticipated move, the Monetary Policy Board of the BOK decided to maintain the benchmark interest rate at 2.5 percent during its latest policy meeting in Seoul.
This marks the sixth consecutive time the rate has been held, even as the central bank technically remains in an easing cycle implemented previously.
Since October 2024, the Bank of Korea has lowered the benchmark interest rate by a total of 100 basis points from 3.5 percent, aiming to stimulate economic growth. The rate has remained unchanged since May 2025.
The BOK confirmed that Thursday’s decision to freeze the interest rate was unanimous.
“With inflation projected to remain stable near the target level, economic growth is expected to continue improving at a stronger-than-expected pace, and risks to financial stability also remain,” the BOK stated in a released statement. “The Board, therefore, judged that it is appropriate to maintain the current level of the Base Rate while assessing developments in the domestic and external policy environments.”
The central bank also presented an optimistic outlook for the South Korean economy, increasing its 2026 growth forecast by 0.2 percentage points to 2 percent.
“Going forward, the domestic economy is expected to continue a recovery in consumption, while growth in exports and facilities investment is projected to accelerate more than previously expected, supported by a strong semiconductor sector and sound global growth,” the statement further noted.
A significant factor influencing Thursday’s decision was the instability in the property market and the increasing levels of household debt.
According to recent data from the Korea Real Estate Board, apartment sale prices in Seoul saw an 8.98 percent year-on-year increase in 2025, representing the highest growth rate since the board began collecting this data in 2013.
Despite tightened regulations aimed at cooling the overheated housing market, the average selling price of apartments in Seoul has continued to rise, increasing by 0.15 percent in the second week of February compared to the previous week.
President Lee Jae Myung has consistently emphasized his strong commitment to stabilizing the real estate market, issuing warnings to multi-home owners, stating that “the root of all problems in this country lies in real estate.”
The BOK also emphasized the importance of stability in the foreign exchange market, given the persistent weakness of the Korean won.
While the won has recovered somewhat from its multi-year low of nearly 1,500 won per US dollar reached late last year, following verbal interventions by authorities and various policy measures, it remains below the critical 1,400 won level due to supply-demand imbalances.
Concerns about further depreciation persist amid ongoing tensions between the United States and Iran, as well as continuous net selling of domestic stocks by foreign investors.
Experts suggest that a rate cut could potentially trigger capital outflows, which, in turn, could further weaken the local currency.
On Thursday, the Korean won opened at 1,426.3 won against the dollar, a rise of 3.1 won from the previous session.
Another key consideration for the BOK is the widening interest rate differential with the United States, as a larger gap could encourage foreign capital outflows and exert further downward pressure on the won.
