BOK Holds Rate at 2.50%, Signals Hike Timing Will Hinge on Inflation Pressures

Inflation, exchange rate and housing add to pressure

The Bank of Korea’s Monetary Policy Board held its benchmark interest rate at 2.50% on May 28 but made clear that a future increase remains possible. The board said it will decide when to raise rates after reviewing inflation pressures, the pace of economic improvement and financial stability conditions.

In a statement after its monetary policy meeting, the board said it would determine the timing of any rate increase while assessing the extent of rising inflation pressure, the recovery in growth and financial stability conditions.

The board said the domestic economy should continue to show solid improvement, supported by a semiconductor upturn despite the impact of the war in the Middle East. The BOK raised its 2026 growth forecast to 2.6% from 2.0%.

The board also heightened its inflation warning, saying price growth is set to remain above target for a considerable period. It said inflation could pick up further as the effects of higher global oil prices spread and demand-side price pressures gradually build with rising incomes.

On financial stability, the board identified the exchange rate, housing prices and household debt as key variables. It said the won has risen again to around 1,500 against the dollar and that the pace of home-price gains in the Seoul metropolitan area has widened.

Five of the board’s seven members backed the decision to keep rates unchanged. Senior Deputy Governor Rhee Sang-dai and board member Jang Yong-sung, both ex-officio members, dissented, arguing that a 25-basis-point increase to 2.75% would be appropriate.

Oh Se-seong, Hankyung.com reporter, sesung@hankyung.com