The Bank of Korea (BOK) may be poised to consider a significant shift toward interest rate hikes, potentially signaling the end of its prolonged easing cycle. This comes as escalating inflationary pressures and evolving geopolitical risks increasingly cloud the economic outlook, according to a senior central bank official.
Speaking at a press conference on the sidelines of the Asian Development Bank’s annual meeting in Samarkand, Uzbekistan, on Sunday, BOK Senior Deputy Governor Ryoo Sang-dai stated, “The time may have come to halt rate cuts and consider moving toward rate hikes.” He elaborated, “Given external shocks and broader economic conditions, I personally see the policy cycle shifting toward rate hikes rather than further cuts.”
The BOK has maintained its benchmark interest rate at 2.5 percent since May 2025, following a two-year period of monetary easing.
Ryoo explained that until late last year, there was a prevailing sentiment within the Monetary Policy Board that an additional rate cut might be possible if stable economic conditions persisted. However, the outbreak of the Middle East conflict earlier this year, coupled with other global developments, has significantly complicated this policy outlook.
Despite initial concerns about potential downside risks to economic growth, the South Korean economy has demonstrated relative resilience. Simultaneously, inflationary pressures have intensified, shifting the BOK’s focus.
This current economic strength is largely attributed to a significantly fortified semiconductor cycle, which has bolstered exports. Furthermore, government stimulus measures have played a crucial role in revitalizing consumer sentiment.
However, Ryoo issued a cautionary note regarding the economy’s increasing reliance on the semiconductor sector. He emphasized, “Growth is currently being driven by strong chip demand, but the key question is what happens when the cycle turns.” He further highlighted that the broader spillover effects from the chip industry to the wider economy have shown signs of weakening.
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