The Bank of Korea held its Base Rate at 2.50% on 28 May 2026, but two of the seven members of its Monetary Policy Board dissented in favour of a quarter-point increase to 2.75%, signalling a shift towards tightening. The dissenting members were Ryoo Sang-dai and Chang Yong-sung. The decision was the eighth consecutive hold and the first policy meeting chaired by Governor Shin Hyun-song, who took office in April.
GOVERNOR SIGNALS HIKE
Shin said a rate rise would be needed. “It is seen necessary to raise the benchmark interest rate at an appropriate time in the future,” he said, adding that the timing and pace of any increase would depend on incoming data.
“Whether viewed through inflation, growth, the exchange rate or the property market, the path forward is clear,” Shin said. The won has remained weak against the US dollar and the property market has stayed hot.
FORECASTS RAISED
The central bank raised its 2026 growth forecast to 2.6% from the 2.0% it projected in February, its sharpest upward revision since May 2021, on the back of robust semiconductor exports. It forecast 2027 growth of 2.1%. It also raised its 2026 inflation forecast to 2.7% from 2.2%, as the war in the Middle East is expected to keep oil prices elevated. “Even if a cease-fire were reached immediately, oil production cannot be turned on and off like a tap,” Shin said.
The board kept the rate unchanged as it waits for clearer signs of how uncertainty from the war in the Middle East and its spillover effects will filter through the economy. The Bank of Korea began its easing cycle in October 2024 and cut its rate by a cumulative 100 basis points from 3.50% before pausing.