“The Board considers it necessary to make its policy decisions, supporting a recovery in economic growth, while closely monitoring changes in domestic and external policy conditions and resulting impacts,” Rhee noted. “With inflation remaining stable around the target level, economic growth is projected to continue its improving trend.”
However, he stressed financial stability concerns, saying it was necessary to remain cautious about risks including housing prices in Seoul and surrounding areas, elevated household debt and exchange-rate volatility.
The Board's largely expected decision was its sixth consecutive hold, driven by its desire to assessing developments in domestic and external policy environments. (See MNI BOK WATCH: Board To Hold, Eye Debt, House Price Concerns) The next policy meeting is scheduled for April 10.
The policy statement reiterated that the Board will conduct monetary policy to stabilise inflation at target over the medium term, while supporting economic growth and paying close attention to financial stability risks.
Policymakers remain cautious about lowering rates immediately, citing elevated real-estate prices and concerns over the inflationary impact of a weaker currency. The bank paused its easing cycle in January, dropping explicit references to future rate cuts amid concerns that signalling further easing could exacerbate currency depreciation and imported inflation pressures. (See MNI BOK WATCH: Board On Hold, Drops Rate Cut Reference)
The BOK noted both upside and downside risks to growth, including developments in the semiconductor industry and the pace of recovery in domestic demand.
GDP OUTLOOK
The central bank raised its 2026 GDP forecast to 2.0% from the 1.8% projected in November, reflecting a strong semiconductor cycle and supportive global growth conditions. However, it lowered its 2027 forecast to 1.8% from 1.9%.
The inflation forecast for this year was revised up slightly to 2.2% from 2.1%. The bank said the future path of inflation will be influenced by global oil prices, exchange-rate movements, domestic and external economic conditions, and government price stabilisation measures.
NEW COMMUNICATION TOOLS
Following a review of its pilot programme and feedback from market participants and academics, the BOK announced it will extend the horizon of its conditional Base Rate projection from three months to six months.
Under the revised framework, each Monetary Policy Board member will present three dots representing their Base Rate projection six months ahead. The new format allows a probabilistic representation of baseline, upside and downside risks, and is expected to provide greater insight into policymakers’ views on the medium-term yield curve.
The bank said the enhanced guidance should support economic agents’ decision-making and improve monetary policy transmission.
