South Korea Interest Rate

The Bank of Korea (BoK) kept its base rate unchanged at 2.50% during its July 2025 meeting, following a 25 bps cut in May, as widely expected. The decision aims to ensure financial stability amid the threat of US tariffs, rising house prices, and mounting household debt. Policymakers maintained their inflation forecasts, projecting both headline and core inflation at 1.9% for the year. Meanwhile, actual inflation edged up slightly to 2.2% in June, remaining close to the BoK’s medium-term target of 2%. Economic growth is expected to remain subdued for some time, with elevated uncertainty surrounding global trade negotiations. At its May meeting, the BoK revised its 2025 growth forecast down to 0.8%, from 1.5% projected in February. Since last October, the central bank has cut rates by a total of 100 bps to support the economy, bringing borrowing costs to their lowest level since September 2022. South Korea’s GDP contracted by 0.2% quarter-on-quarter in Q1 2025.