South Korea Interest Rate

The Bank of Korea (BoK) lowered its base rate by 25 basis points to 2.50% during its May 2025 meeting, after holding rates steady in April, as expected. The decision came as the economy contracted in Q1 2025 amid easing inflation and the threat of US tariffs. This move marks the central bank's fourth rate cut since last October, bringing borrowing costs to their lowest level since September 2022. Additionally, the BoK revised its growth forecast for the year to 0.8%, down from 1.5% projected in February, amid weakening domestic demand and slowing export growth due to changes in US tariff policy. Meanwhile, policymakers kept their inflation forecasts steady, projecting headline inflation at 1.9% for the year, while core inflation was revised up to 1.9% from the previous forecast of 1.8%. In April, annual inflation stood at 2.1%, remaining close to the BoK’s medium-term target of 2%. South Korea's GDP shrank by 0.2% quarter-on-quarter in Q1 2025.