FX.co ★ South Korea Holds Rates at 2.5% as Expected

The Bank of Korea (BoK) maintained its base interest rate at 2.50% during its meeting in July 2025, following a 25-basis-point reduction in May, as predicted by analysts. This decision occurs amidst the looming risk of US-imposed tariffs and escalating concerns over household debt, with mortgage-backed loans increasing by 5.6 trillion won in May, compared to a 4.8 trillion won rise in April. Concurrently, inflation edged closer to the BoK’s medium-term goal of 2%, slightly rising to 2.2% in June. Since October of the previous year, the central bank has reduced rates by a cumulative 100 basis points to foster economic growth, resulting in borrowing costs being the lowest since September 2022. For the first quarter of 2025, South Korea's GDP contracted by 0.2% on a quarter-on-quarter basis.