South Korea’s central bank left its key interest rate unchanged on Thursday, keeping the benchmark rate at 2.5 percent while slightly raising its growth outlook for the year.
The decision comes against the backdrop of soaring housing prices in Seoul and persistent uncertainties tied to U.S. trade policies under President Donald Trump.
Asia’s fourth-largest economy has shown resilience, expanding more than expected in the second quarter as robust demand for semiconductors pushed exports to their highest growth in nearly five years.
In a statement, the Bank of Korea (BOK) noted: “While inflation remains on a stable path, uncertainty over the growth outlook is still high. However, signs of modest improvement are emerging, led by domestic demand.”
The central bank said keeping rates steady was appropriate, pointing to concerns over the sharp rise in housing prices.
Still, the BOK flagged risks from U.S. tariffs. Initially, South Korean exports were hit with a sweeping 25 percent tariff, but Seoul secured a last-minute deal to reduce the rate to 15 percent after agreeing to major investment commitments in the United States.
Looking ahead, the BOK warned that while exports remain strong, they are likely to “gradually weaken as the impact of U.S. tariffs broadens.”
Reflecting cautious optimism, the bank revised its 2025 growth forecast upward to 0.9 percent, from 0.8 percent in May.
But it stressed that significant uncertainties remain, stemming from U.S.–China trade talks, product-specific tariffs, and the pace of domestic demand recovery.
Governor Rhee Chang-yong signaled that the current rate-hold stance would likely extend into the first half of next year, citing sluggish growth trends.
He also acknowledged that the “very positive” summit earlier this week between President Trump and South Korea’s President Lee Jae Myung made Thursday’s decision less contentious.
The Washington meeting, held Monday, coincided with major investment pledges from South Korean firms in the United States, underscoring Seoul’s delicate balancing act between safeguarding exports and sustaining domestic stability.
