BOK signals cautious, data-driven approach to rate cuts
The Bank of Korea (BOK) said Thursday it will take a data-driven and cautious approach when deciding on further interest rate cuts next year, closely monitoring inflation, economic growth, and foreign exchange market conditions.
In its monetary and credit policy operating guidelines for 2026, the central bank said future rate decisions will be based on a comprehensive assessment of incoming data, including inflation trends, growth uncertainties, and risks to financial stability, News.Az reports, citing foreign media.
The BOK kept its benchmark interest rate unchanged at 2.5 percent at its most recent policy meeting, marking the fourth consecutive hold. The central bank has lowered rates by a cumulative 100 basis points from 3.5 percent since October last year to support economic growth.
While inflation is expected to remain near the target level, the BOK warned that upward pressure could intensify due to a weak exchange rate and recovering domestic demand. The growth outlook also faces risks tied to global trade conditions, the semiconductor cycle, and the pace of domestic recovery.
The central bank projects South Korea’s economy will grow 1.8 percent in 2026, accelerating from an estimated 1 percent expansion this year.
From a financial stability perspective, the BOK stressed the need for vigilance over housing prices in the Seoul metropolitan area, rising household debt, and increased currency volatility. It pledged to strengthen market monitoring and deploy stabilization measures to curb excessive market fluctuations.
The BOK also said it will push forward foreign exchange market reforms, including plans for 24-hour FX trading and measures to improve access for foreign investors. Additionally, the bank plans to extend currency swap agreements and enhance regional financial safety nets to better absorb external shocks.
On digital assets, the BOK said it will actively engage in legislative discussions on stablecoins while working to establish a governance framework that safeguards macroeconomic stability.
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