Bank of Korea holds Base Rate steady at 2.50 percent

The Bank of Korea (BOK) noted that economic growth continues to improve, supported by a sustained recovery in consumption and continued export growth, particularly in the strong semiconductor sector.

Despite sluggishness in construction investment, the overall number of employed persons has continued to grow, led by the service sector.

The BOK projects this year's growth rate to be broadly consistent with its November forecast of 1.8 percent.

However, the Board judged that upside risks to this growth path have increased somewhat, reflecting the accelerating upward trend in the semiconductor sector and stronger-than-expected growth in major economies.

Global growth is also expected to maintain a moderate pace, supported by expansionary fiscal policies and AI-related investment.

Consumer price inflation declined slightly to 2.3 percent in December, while core inflation (excluding food and energy) remained unchanged at 2.0 percent.

Short-term inflation expectations among the general public also held steady at 2.6 percent.

The BOK expects inflation to gradually decline to the 2 percent level, supported by stable global oil prices, though the elevated exchange rate is likely to exert upward pressure.

Both headline and core inflation for this year are expected to be generally consistent with the November forecasts of 2.1 percent and 2.0 percent, respectively.

In financial markets, the Korean won to US dollar exchange rate saw volatility, while Korean Treasury bond yields rose before declining.

Household loans continued their slowing trend, but housing prices in Seoul and its surrounding areas continued to rise at a high pace.