BoK says rate decision was unanimous and that Middle East conflict poses risks to growth
Says:
- Growth likely to be below 2% this year
- To thoroughly assess external and internal conditions including the Middle East situation
- To closely monitor impact on inflation, growth and financial stability
- Necessary to remain cautious about FX volatility
- Inflation likely to be significantly above 2.2% this year
- Necessary to keep monitoring house prices and household debt
- FX market volatility and government policy measures to impact inflation path
- Uncertainty extremely high over economic outlook
- Trade uncertainties, Middle East conflict and chips sector momentum to impact growth ahead.
- Raises 2026 GDP growth forecast to 2.0% from 1.8% and CPI forecast to 2.2% from 2.1%.
Context
The Bank of Korea's unanimous rate decision signals a cautious approach amid rising uncertainty, particularly due to geopolitical risks in the Middle East. With growth expected to underperform at below 2% this year and inflation surpassing 2.2%, the implications for currency stability and future policy adjustments are significant, suggesting that traders should be alert to potential volatility in the FX markets.
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