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BOK likely to keep benchmark rate untouched for sixth straight freeze

Published: 20 Feb. 2026, 13:04 Updated: 20 Feb. 2026, 14:52

Bank of Korea Gov. Rhee Chang-yong speaks during a press conference on the Monetary Policy Board’s rate decision at the Bank of Korea headquarters in Jung District, central Seoul, on Oct. 23, 2025. [JOINT PRESS CORPS]

The Bank of Korea (BOK) is likely to keep its benchmark interest rate unchanged at 2.5 percent at the Monetary Policy Board meeting scheduled for Thursday, which would mark a sixth consecutive rate freeze.

The decision comes as the dollar-won exchange rate has remained stuck around the 1,450 won level and uncertainty over U.S. monetary policy has added to market volatility.

At its Federal Open Market Committee meeting held on Jan. 27 to 28, the U.S. Federal Reserve kept its key rate unchanged at 3.5 to 3.75 percent. Minutes released on Wednesday showed that some members reflected “the possibility that upward adjustments to the target range for the federal funds rate could be appropriate if inflation remains at above-target levels.”

The remarks, interpreted as leaving the door open for a rate hike, strengthened the dollar. The dollar index, which measures the greenback against six major currencies, rose from the low 97 range the previous day to around 97.7 as of the morning of Thursday.

The Korean won has come under depreciation pressure in response. On the first trading day after the Lunar New Year holidays, which was Thursday, the dollar-won exchange rate climbed to as high as 1,452 won in early trading, fluctuating in the 1,450 won range.

The currency’s failure to stabilize below the mid-1,400 won level remains a burden. With the interest rate gap between Korea and the United States standing at 1.25 percentage points, concerns are growing that if Korea cuts rates first, volatility in the foreign exchange market could expand again.

Asset markets are another variable. Apartment prices in Seoul have risen for 53 weeks straight. Cutting rates at a time when both the exchange rate and housing prices remain elevated could simultaneously spur further won weakness and asset price gains — one reason the central bank is hesitant to press the rate-cut button.

U.S. Federal Reserve Chair Jerome Powell gestures during a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy, in Washington on Jan. 28. [REUTERS/YONHAP]

External conditions are also unstable. The Korea Development Institute’s Economic Policy Uncertainty Index, which quantifies uncertainty related to economic policy, surged 37.9 percent on month to 161.62 in January, marking the first increase in three months. The rise reflected trade risks such as U.S. tariff pressure.

Ryoo Sang-dai, senior deputy governor of the BOK, convened a market situation review meeting on Thursday and said that “volatility in major price variables has increased since February.” He added that the central bank would “continue to closely monitor the development of domestic and external risk factors and their impact on the domestic financial and foreign exchange markets.”

Morgan Stanley said in a recent report that the BOK is likely to keep the benchmark rate unchanged at the February Monetary Policy Board meeting, taking into account the exchange rate and rising housing prices in the Seoul metropolitan area.

Along with the rate decision, the BOK is set to release revised economic forecasts. A key point of interest is whether it will raise its growth outlook for this year from the 1.8 percent projection presented in November last year.

The International Monetary Fund has forecast 1.9 percent growth for this year, while the Korean government projected 2 percent and the Organisation for Economic Cooperation and Development expected 2.1 percent. The average forecast for this year’s growth among eight major global investment banks also stands at around 2.1 percent, according to the Korea Center for International Finance.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM WON [[email protected]]