Central Bank leaves rates unchanged in January

Bank holds for a fifth successive meeting: At its meeting on 15 January, the Bank of Korea (BOK) decided to leave the base rate unchanged at 2.50%. The decision matched market expectations and marked the fifth successive hold after May’s 25 basis point cut.

Lingering threat of financial instability underlies cautious approach: The decision to keep interest rates unchanged was mainly driven by domestic factors. Inflation is expected to ease gradually, while economic activity continues to gain traction. At the same time, the Central Bank flagged lingering risks to financial stability due to the housing market crisis in Seoul and the recent KRW depreciation, leading it to take a cautious, wait-and-see stance.

BOK signals end of easing cycle: The Bank of Korea offered no explicit guidance on the future path of interest rates, but the tone of the release was more hawkish than previously. The policy statement dropped any reference to potential rate cuts, a marked shift from November, when officials said they would keep the option of easing on the table. This shift was also reflected in the three-month policy outlook, where fewer board members now see scope for a reduction. The balance moved from an even 3–3 split in November to a clear 1–5 tilt against a cut. Against this backdrop, most of our panelists expect the BOK to keep rates unchanged through 2026.

Panelist insight: Commenting on the outlook, ING’s Min Joo Kang said: “Even if growth recovers faster than expected, a fragile recovery outside of the semiconductor sector still requires supportive macro policies. Fiscal policy will play a critical role, while monetary policy is likely to offer targeted liquidity through lending facilities. Today, the BoK extended the Temporary Special Support program for low-credit self-employed and for SMEs by six months. Considering recent macro conditions and the outlook, we maintain our view that the BoK will keep its policy rate at 2.5% throughout 2026.”

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