Statement from the January Monetary Policy Meeting
On January 15, the Monetary Policy Committee of the Bank of Korea decided to keep the benchmark interest rate unchanged at 2.50% per annum, stating, "Going forward, monetary policy will be determined to support the recovery of growth, while closely monitoring changes in domestic and external policy conditions, as well as the resulting trends in inflation and financial stability."
Lee Changyong, Governor of the Bank of Korea, is striking the gavel at the Monetary Policy Committee plenary meeting held at the Bank of Korea headquarters in Jung-gu, Seoul on the morning of the 15th. 2026.01.15 Photo by Kang Jinhyung
The Monetary Policy Committee announced this decision through the statement on the direction of monetary policy distributed that morning. In this latest statement, phrases from last November such as "possibility of a rate cut" and "deciding on further rate cuts and their timing" were removed and replaced with "supporting the recovery of growth" and "decision."
Regarding the background for the rate freeze, the committee explained, "While inflation is expected to gradually stabilize, growth continues to improve, and risks to financial stability persist. Therefore, we believe it is appropriate to maintain the current level of the benchmark interest rate while carefully assessing domestic and external policy conditions."
The committee assessed that, compared to the November 2025 outlook (1.8%), upside factors for the domestic economy have become more prominent. "Looking ahead, the domestic economy is expected to continue its improvement, with exports maintaining solid growth thanks to a robust semiconductor market, and domestic demand also improving due to a continued recovery in consumption and an easing of sluggish construction investment," the committee stated. "While this year's growth rate is expected to largely align with the 1.8% forecast from November, upside risks have somewhat increased due to a stronger semiconductor market and better-than-expected growth in major economies."
Regarding domestic inflation, the committee noted, "Inflation is expected to gradually decline to around 2% due to stable international oil prices, but a higher exchange rate poses an upside risk." They added, "This year's consumer price inflation is expected to largely match the November forecast of 2.1%, but it will be influenced by movements in the exchange rate and international oil prices, domestic and global economic trends, and the government's price stabilization measures."
On the financial and foreign exchange markets, the committee observed, "The won-dollar exchange rate fell sharply due to foreign exchange market stabilization measures, but then rose again to the mid-to-high 1,400 won range due to a stronger US dollar, a weaker yen, increased geopolitical risks, and continued overseas investment by residents." They continued, "While household loans continued to slow, housing prices in the Seoul metropolitan area have remained on a steep upward trend."
The committee stated, "Going forward, we will monitor the growth trend and manage monetary policy to ensure that inflation stabilizes at the target level over the medium term, while also paying close attention to financial stability."
Below is the full text of the statement on the direction of monetary policy.
The Monetary Policy Committee has decided to maintain the Bank of Korea's base rate at the current level of 2.50% until the next policy decision, thereby managing monetary policy accordingly. While inflation is expected to gradually stabilize, growth continues to improve, and risks to financial stability persist. Therefore, the committee believes it is appropriate to maintain the current level of the benchmark interest rate while carefully assessing domestic and external policy conditions.
The global economy is expected to maintain moderate growth, supported by expansionary fiscal policies in major economies and continued investment related to artificial intelligence, despite the impact of US tariff policies. Inflation trends are likely to differ by country. In international financial markets, long-term government bond yields have risen due to diminished expectations of additional rate cuts in major economies and concerns over fiscal soundness. The US dollar, after a period of weakness, has strengthened again due to better-than-expected economic indicators. Stock prices have continued to rise on expectations of improved corporate earnings. Going forward, the global economy and international financial markets are expected to be influenced by changes in monetary and fiscal policies in major economies, the global trade environment, and geopolitical risks.
In the domestic economy, despite sluggish construction investment, the improvement continued as the recovery in consumption and the increase in exports persisted. Employment also continued to rise, mainly in the service sector. Looking ahead, the domestic economy is expected to maintain its improvement, with exports showing solid growth due to a robust semiconductor market, and domestic demand also improving thanks to continued consumption recovery and an easing of sluggish construction investment. This year's growth rate is expected to largely align with the November 2025 forecast (1.8%), but upside risks have somewhat increased due to a stronger semiconductor market and better-than-expected growth in major economies.
Regarding domestic prices, the consumer price inflation rate fell slightly to 2.3% in December, as the rise in petroleum product prices was offset by a slowdown in the increase of agricultural, livestock, and fishery product prices. The core inflation rate (excluding food and energy) remained at 2.0%, the same as the previous month. The short-term inflation expectation rate (general public) remained at 2.6%. Going forward, inflation is expected to gradually decline to around 2% due to stable international oil prices, but a higher exchange rate is likely to act as an upside risk. This year's consumer price and core inflation rates are expected to largely match the November forecasts (2.1% and 2.0%, respectively), but future inflation trends will be influenced by movements in the exchange rate and international oil prices, domestic and global economic trends, and the government's price stabilization measures.
In the financial and foreign exchange markets, the won-dollar exchange rate fell sharply due to foreign exchange market stabilization measures, but then rose again to the mid-to-high 1,400 won range due to a stronger US dollar, a weaker yen, increased geopolitical risks, and continued overseas investment by residents. Government bond yields rose significantly as expectations for rate cuts weakened, then eased somewhat. Stock prices surged on expectations of improved earnings in major sectors such as semiconductors. Household loans continued to slow due to a reduction in housing-related loan growth and net repayments of other loans, but housing prices in the Seoul metropolitan area remained on a steep upward trend.
The Monetary Policy Committee will continue to monitor the growth trend and manage monetary policy to ensure that inflation stabilizes at the target level over the medium term, while paying close attention to financial stability. While the domestic economy continues to improve, upside risks to the future path have somewhat increased. Inflation is expected to gradually decline, but the higher exchange rate remains a potential upside risk. From a financial stability perspective, risks related to housing prices in the Seoul metropolitan area, household debt, and high exchange rate volatility persist. Therefore, going forward, monetary policy will be determined to support the recovery of growth, while closely monitoring changes in domestic and external policy conditions, as well as the resulting trends in inflation and financial stability.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
