South Korea Interest Rate

The Bank of Korea (BoK) lowered its base rate by 25 bps to 2.75% at the February 2025 meeting, after keeping the rate unchanged in January. This marked the third reduction in four months, aligning with market expectations. The decision brought borrowing costs to their lowest level since September 2022, amid the continued stabilization of inflation, easing household debt, and weak economic growth. Additionally, the central bank revised its growth forecast for this year to 1.5%, down from 1.9% in the November forecast, due to the impact of US tariff policy changes, domestic political situations, and the government’s economic stimulus measures. Meanwhile, policymakers held their inflation forecast steady at 1.9% for both this year and next and the core inflation rate is expected to be 1.8%, slightly below the previous forecast of 1.9%. In January, annual inflation accelerated to 2.2% but remained close to the BoK's medium-term target of 2%.