The Bank of Korea (BOK) opted to maintain its benchmark interest rate at 2.50% on April 10, 2026, marking a seventh consecutive rate freeze. The decision comes as Governor Rhee Chang-yong presided over his final Monetary Policy Committee meeting before concluding his four-year term on April 20, 2026.
The base rate held at 2.5% reflects a strategic pivot by the central bank. While the BOK had shifted toward a loosening cycle in October 2024—implementing four rate cuts totaling 1.00 percentage point through May 2025—it has since maintained a steady hand. This pause was driven by mounting domestic uncertainties, specifically the rise of housing prices in the Seoul metropolitan area and heightened volatility in the KRW/USD exchange rate.
External pressures have further complicated the policy landscape. The ongoing conflict between Israel and Iran has introduced significant supply shocks, causing international oil prices to spike and adding pressure to the currency market. Governor Rhee warned that these geopolitical developments could lead to concerns over potential stagflation, depending on the trajectory of the war.
The decision highlights the BOK’s struggle to balance inflation control with economic growth. According to the central bank, economic growth is expected to fall below 2% this year, while inflation is projected to rise into the mid-to-high 2% range. Policymakers expressed concern that premature rate cuts could trigger capital outflows and exacerbate upward pressure on the exchange rate.
Addressing currency management, Governor Rhee noted that exchange rate perspectives should no longer be based on historical comparisons. He further emphasized the critical importance of maintaining foreign exchange reserves, stating that failing to protect these assets would make it tricky to manage future economic crises.
