Bank of Korea Holds Rates Steady, Raises Growth Forecasts

Bank of Korea Holds Rates Steady, Raises Growth Forecasts

South Korea's central bank held rates steady at its first meeting under Gov. Shin Hyun-song, but kept the door open to policy tightening as it forecast higher growth and inflation. The Bank of Korea kept its benchmark seven-day repurchase rate unchanged at 2.50% on Thursday, marking the eighth straight meeting without a change.

Outlook and Future Moves

Twenty-four of 25 economists surveyed by The Wall Street Journal had forecast no change in May. Most economists expect the central bank to adopt a more hawkish stance in the coming months, citing upside risks to economic growth and inflation. Many expect a rate increase in the third quarter, possibly as early as in July, pointing to strong first-quarter economic growth driven by robust chip exports and higher inflation fueled by higher oil prices amid Middle East tensions.

Growth and Inflation Forecasts

The bank on Thursday raised its growth forecasts for Asia's fourth-largest economy. It now expects gross domestic product to grow 2.6% in 2026, up from its February projection of 2.0%. It also expects the economy to expand 2.1% in 2027, compared with its earlier estimate of 1.8%. The bank forecasts inflation to average 2.7% this year and 2.3% next year.