Korean Central Bank scraps rate cut ‘stance’ while staying open to possible cut

South Korea’s central bank kept its benchmark rate unchanged and removed a reference in its statement to maintaining a rate-cut stance while also allowing that it would remain open to a possible reduction in borrowing costs.

The Bank of Korea held its seven-day repurchase rate at 2.5% for a fourth straight meeting on Thursday. The decision matched expectations from 21 of 24 economists surveyed by Bloomberg, with the other three predicting a quarter-point cut. The move extends a pause that began in July after four reductions since October 2024.

Alongside its rate decision, the BOK released updated forecasts, raising its 2026 growth outlook to 1.8% from 1.6% projected in August and lifting its 2025 estimate to 1%, reflecting solid third-quarter output supported by strong exports and a steady recovery in private consumption. The inflation projection for next year was also revised up to 2.1% from 1.9%.

Policymakers are navigating the conflicting challenges of keeping a resurgent Seoul property market from further spurring household debt while also supporting an economy that faces potential headwinds from higher US tariffs. As of Nov. 17, apartment prices in the capital had climbed for 42 consecutive weeks, despite fresh government measures to cool demand, heightening concerns about financial instability risks.

The tweaks to the BOK statement appeared to show it was inching closer to a neutral stance on policy, while retaining one eye on potential downside risks to growth.

“The main uncertainty lies in the property market, where prices in Seoul have jumped since the start of the year,” Gareth Leather, senior Asia economist at Capital Economics, wrote in a note following the announcement. “Further easing is only likely once the central bank sees evidence that the property sector is responding.”

Korea’s benchmark Kospi extended gains after the bank held rates steady and revised its growth outlook higher, while government bond yields rose ahead of the governor’s press briefing. The won strengthened as the yen remained firm.

Price trends have been mostly in line with the BOK’s forecasts, though the core consumer price gauge quickened a little more than expected in October. Prices that month rose 2.4% from a year earlier, the fastest pace since July 2024. The central bank said the path of consumer inflation “is expected to gradually slow” as oil prices trend lower compared with a year earlier and travel costs stabilize.

Thursday’s decision comes after Governor Rhee Chang Yong reaffirmed the board’s easing bias in an interview with Bloomberg TV this month, while saying that the timing and size — or the direction — of any future rate moves would depend on incoming data. In October, Rhee said four board members were open to a rate cut within three months, down from five in August.

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