Monetary Policy Board: "Expected growth rate this year to fall below 2.0% and inflation to significantly exceed 2.2%"

"Future monetary policy will be determined by monitoring the Middle East conflict, inflation, growth, exchange rates, housing prices, and household debt."

Bank of Korea Governor Lee Chang-yong presides over Monetary Policy Board meeting (Seoul=Yonhap News) Lee Chang-yong, Governor of the Bank of Korea, bangs the gavel at the Monetary Policy Board meeting held at the Bank of Korea headquarters in Jung-gu, Seoul, on April 10, 2026. 2026.4.10 [Photo Joint Press Corps] photo@yna.co.kr

The Monetary Policy Board (MPB) of the Bank of Korea, in a unanimous decision by all seven members, decided to keep the benchmark interest rate unchanged at 2.50% on April 10, raising the possibility that economic growth this year will be lower than initially expected and inflation will rise.

In its monetary policy direction meeting statement on the same day, the MPB explained the rationale for the freeze, stating, "Amidst the escalating upside pressure on prices and downside pressure on growth due to the Middle East conflict, coupled with significant volatility in financial and foreign exchange markets, it is appropriate to maintain the current benchmark interest rate level and further monitor the trends and impacts of the situation, given the considerable uncertainty surrounding the Middle East crisis."

Specifically regarding the domestic economy, the MPB diagnosed, "Despite strong semiconductor exports and a supplementary budget, growth is expected to slow more than initially anticipated due to the impact of rising energy prices and supply disruptions, leading to an annual growth rate below the February forecast (2.0%). However, the growth trajectory will be significantly influenced by the unfolding situation in the Middle East, changes in the trade environment, the semiconductor market, and the pace of domestic demand recovery."

Regarding inflation, the MPB projected, "Upside pressure on consumer price inflation will significantly increase due to the impact of rising international oil prices, but government measures to stabilize prices will partially mitigate this, leading to a rise to the mid-to-high 2% range. Consequently, consumer price inflation for the year is expected to significantly exceed the February forecast (2.2%), and the core inflation rate (excluding energy and food) is also projected to be somewhat higher than the initial forecast (2.1%)."

The MPB announced, "In terms of financial stability, attention will be paid to the impact of increased exchange rate volatility, and it is necessary to continuously monitor whether the stabilizing trend in metropolitan housing prices and household debt will be sustained. Future monetary policy will be determined through close monitoring of changes in domestic and external conditions, including the Middle East conflict, and the subsequent trends in inflation, growth, and financial stability."