Bank of Korea Holds Rates Steady, Raises Growth Forecasts

Bank of Korea Holds Interest Rate Steady

The Bank of Korea (BOK) kept its benchmark seven-day repurchase rate unchanged at 2.50% at its first meeting under Governor Shin Hyun-song, marking the eighth consecutive hold. Most economists expect a more hawkish stance in the coming months due to upside risks to growth and inflation.

Growth and Inflation Forecasts Raised

The BOK raised its 2026 GDP growth forecast to 2.6% from 2.0%, and its 2027 forecast to 2.1% from 1.8%. Inflation forecasts were also revised up: to 2.7% for 2026 (from 2.2%) and 2.3% for 2027 (from 2.0%).

Export and Inflation Data

South Korea's trade-dependent economy remains resilient despite geopolitical risks. Exports surged 48% year-on-year in April, driven by semiconductor shipments. Consumer inflation accelerated to a 21-month high of 2.6% in April, highlighting the impact of higher oil prices.

Policy Tightening Expectations

Analysts expect the BOK to raise rates as early as July. Citigroup economist Jin-Wook Kim forecasts four rate hikes in 2026 and 2027. HSBC economist Jin Choi noted the board is likely to signal greater readiness to tighten if needed, while stressing data dependence.