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Summary:Bank of Korea (BoK) seen holding base rate at 2.50% on January 15Won weakness and inflation risks limit easing scopeCentral bank signals end of easing cycleSeoul housing prices complicate policy outlookNext rate cut pushed back to 2027South Korea’s central bank is expected to extend its policy pause this week, with economists unanimous that the Bank of Korea will hold its base rate at 2.50% at Thursday’s meeting as currency weakness, inflation risks and housing-market pressures limit scope for further easing.All 34 economists surveyed in a Reuters poll forecast no change in rates on January 15, reflecting concern that the recent fall in the Korean won could feed through to higher import prices and complicate the inflation outlook. The won has weakened nearly 2% so far this year, an issue the BOK itself flagged at its November meeting as a constraint on policy flexibility.South Korea’s inflation rate eased to 2.1% in 2025, down from 2.3% the year before, but remains above the BOK’s 2% target. With price pressures still elevated and the currency under strain, policymakers appear reluctant to resume rate cuts despite signs of moderating growth.The central bank has also signalled it may be nearing the end of its easing cycle, subtly shifting its forward guidance. Language referring to a continued rate-cut stance has been replaced with wording that the board will decide “whether and when” to implement any further cuts, reinforcing expectations of a prolonged pause.Housing dynamics add another layer of complexity. Apartment prices in Seoul rose 0.18% in the week to January 5 and climbed 8.7% over 2025, underscoring concerns about financial stability risks should borrowing costs fall further. Economists said elevated house-price expectations have sharpened the BOK’s focus on maintaining currency stability and containing asset-price pressures.Reflecting this reassessment, the Reuters poll showed expectations for the next rate cut have been pushed back to 2027, a notable shift from November, when more than 60% of respondents anticipated at least one cut in early 2026. Only 22% now expect a cut this quarter.Looking ahead, South Korea’s economy is forecast to grow 2.0% in 2026, slightly above the BOK’s own estimate, while inflation is seen averaging 1.9%, just below the central bank’s projection — a mix that supports patience rather than urgency. —Bank of Korea dates this year:
This article was written by Eamonn Sheridan at investinglive.com.
💡 DMK Insight
The Bank of Korea’s decision to hold the base rate at 2.50% signals a cautious approach amid inflation risks and a weak won. For traders, this pause indicates that the easing cycle may be over, which could stabilize the won in the short term. However, the mention of housing prices complicating the policy outlook suggests potential volatility in the real estate sector, impacting related assets. If inflation continues to rise, the BoK might be forced to reconsider its stance sooner than expected, making it crucial to monitor inflation metrics and housing market trends closely. Traders should keep an eye on the won’s performance against major currencies, as any significant weakness could trigger intervention or a shift in policy sooner than 2027, when the next rate cut is projected. Watch for key support levels in the USD/KRW pair, as a break above recent highs could signal further weakness in the won.
📮 Takeaway
Monitor the USD/KRW pair closely; a break above recent highs could indicate further won weakness, impacting trading strategies in forex and related markets.
