The Bank of Korea reduced its benchmark policy rate by 25 basis points to 2.75% at its February 2025 monetary policy meeting, marking the third cut since the central bank began its easing cycle in October 2024. The decision was unanimous among board members, the institution confirmed in its post-meeting statement.
The Monetary Policy Board cut its 2025 gross domestic product growth forecast to 1.5% from 1.9%. Domestic demand remained weak heading into the February meeting, and political uncertainty that had weighed on business and consumer confidence in prior months was described as having eased somewhat.
DOMESTIC DEMAND AND EXPORTS
Consumer spending and private investment in South Korea struggled to gain traction despite the two earlier rate reductions delivered in October and November 2024. Export growth also slowed.
POLICY OUTLOOK
Governor Rhee Chang-yong signalled that the path of policy rates through the remainder of 2025 would be determined by incoming economic data rather than a pre-set schedule, while keeping the pace and timing of further cuts open and maintaining an easing bias. Two board members said they were open to a further cut within the next three months, under the Bank of Korea's practice of disclosing members' three-month rate outlooks.
The Bank of Korea said it would continue to monitor financial stability conditions alongside the growth and inflation outlook as it calibrates policy, noting that the domestic housing market and household debt dynamics remain relevant considerations alongside the broader macro picture.