The Bank of Korea (BoK) held its base rate at 2.50% for the fifth consecutive meeting in January 2025, the first policy session of the year, as expected. The decision came amid concerns over a weakening exchange rate, household debt, and an overheated housing market. The Korean won has weakened nearly 2% during the first two weeks of the year, increasing the risk of higher consumer prices. However, the central bank maintained its headline and core inflation forecasts for this year at 2.1% and 2.0%, respectively. The GDP growth outlook is also unchanged from the November forecast of 1.8% for 2026. The latest data showed that South Korea’s inflation stood at 2.1% in 2025, slightly lower than 2.3% in 2024 but still above the BoK’s 2% target. Meanwhile, GDP grew 1.3% qoq in Q3 2025, marking the strongest expansion in nearly four years, while the BoK expects GDP to grow by less than 0.2% in Q4. Since October 2024, the BoK has cut rates by a cumulative 100 bps to support economic growth.
