Bank of Korea Holds Interest Rates Steady, Raises Growth Forecast

The Bank of Korea has maintained its policy rate unchanged for a sixth consecutive meeting, while also increasing its growth and inflation projections for the current year. Policymakers have refrained from cutting interest rates as strong demand for the country's semiconductor exports has reduced the necessity for additional economic support. Authorities are also monitoring the weakness of the South Korean won against the US dollar, alongside the risk that lower borrowing costs could exacerbate household debt levels. On Thursday, the central bank kept its benchmark seven-day repurchase rate steady at 2.50%, a move that was widely anticipated by financial markets. Among 25 analysts surveyed, 21 had expected this decision. Most analysts anticipate the central bank will keep rates unchanged through the end of the year, with some forecasting a potential rate hike as early as 2027. The Bank of Korea also revised upward its growth forecast for Asia's fourth-largest economy. It now expects gross domestic product (GDP) to expand by 2.0% in 2026, up from a previous projection of 1.8% made in November.