The Bank of Korea will assess the timing and pace of future base rate cuts following its recent reduction. There is a high level of uncertainty surrounding Korea’s growth outlook.
The Bank plans to monitor the domestic political climate closely. It anticipates a slowdown in export growth and will examine both domestic and international economic policy changes.
The effects of the recent rate cuts will also be observed carefully. Domestic economic growth is expected to remain low for an extended period, requiring caution regarding potential increases in household debt.
Various factors, including U.S. tariff policies, Federal Reserve actions, and local government stimulus measures, contribute to economic uncertainties. Additionally, there is a need for caution concerning exchange rate volatility.
Inflation levels are projected to remain stable at around 2% due to subdued demand pressures.
The recent rate cut reflects an adjustment aimed at addressing sluggish economic conditions, but further reductions will depend on how things unfold. Following this move, the bank will take a cautious approach, weighing risks tied to debt accumulation.
Trade remains a concern. Overseas demand is showing signs of a slowdown, and with expected shifts in global monetary policy, external risks are not easing. The direction taken by policymakers in Washington will have immediate consequences, particularly if tariff adjustments alter the balance of trade. At the same time, domestic initiatives to support economic activity will require careful handling to avoid unintended distortions.
Price stability seems to be holding, with inflation tracking close to current projections. However, the persistence of weak demand suggests that cost pressures are unlikely to build quickly. That being said, swings in foreign exchange markets could pose challenges. A weaker currency may lift import prices, and if confidence wavers, capital flows could become less predictable.
For now, keeping a close watch on global shifts remains essential. Any further response will need to account for how these external and internal conditions develop in the coming weeks.
