Bank of Korea Expected to Hold Interest Rates at 2.50% Through 2026 Amid Currency and Housing Market Risks

South Korea’s central bank is widely expected to keep its benchmark interest rate unchanged at 2.50% this week and likely through 2026, according to a recent Reuters poll. The Bank of Korea (BOK) is maintaining a cautious stance as it navigates ongoing currency volatility and signs of overheating in the housing market.

All 34 economists surveyed between February 19 and 23 forecast that the BOK will hold its base rate steady at its February 26 policy meeting. This outlook reflects growing concerns over financial stability, particularly as the Korean won remains under pressure. Since the last interest rate cut in May, the won has declined 5.2%, prompting authorities to step up efforts to curb excessive foreign exchange volatility, including activating an FX swap line between the Bank of Korea and the National Pension Service. The currency’s weakness has also drawn scrutiny from the U.S. Treasury.

Although South Korea’s inflation rate eased to a five-month low of 2.0% in January, matching the central bank’s target, policymakers appear reluctant to resume monetary easing. Recent signals from the BOK suggest its rate-cutting cycle is nearing an end, with greater emphasis now placed on exchange rate stability and financial risks.

Housing prices remain another key concern. Seoul apartment prices have risen for 55 consecutive weeks, climbing 0.15% in the week ending February 16, according to Korea Real Estate Board data. The sustained rally has heightened fears of asset bubbles and broader financial imbalances.

Economists also point to resilient economic growth and strong export performance, supported by global demand for high-tech products linked to the AI boom. Most analysts now expect interest rates to remain steady through 2026 and possibly 2027, with any future policy tightening dependent on sustained recovery and rising inflationary pressures.