▲ This file photo shows Bank of Korea Gov. Shin Hyun-song delivering a speech during his inauguration in Seoul on April 21, 2026. (Pool photo) (Yonhap)
▲ This file photo taken April 10, 2026, shows a Monetary Policy Board meeting at the Bank of Korea in Seoul. (Yonhap)

(News Focus) central bank-rate-setting meeting

(News Focus) BOK expected to hold key rate steady, signal hawkish stance amid inflation concerns

By Kim Boram

SEOUL, May 26 (Yonhap) -- The Bank of Korea (BOK) is expected to keep the benchmark interest rate unchanged at its monetary policy meeting later this week for an eighth consecutive meeting, though its policy stance is likely to turn more hawkish amid rising inflation and stronger-than-expected economic growth, analysts said Tuesday.

BOK Gov. Shin Hyun-song will preside over the Monetary Policy Board meeting on Thursday, his first rate-setting meeting since taking office last month.

The central bank has held the benchmark rate steady at 2.5 percent for seven consecutive meetings since May last year.

A recent poll of six economists conducted by Yonhap News Agency showed that all respondents expected the BOK to keep rates unchanged at the May meeting, citing lingering uncertainties stemming from the ongoing conflict in the Middle East.

"It is highly likely that the Monetary Policy Board will take a wait-and-see approach," said Jang Min, a senior researcher at the Korean Institute of Finance.

"As external factors continue to drive inflation, the central bank will likely keep rates unchanged for now and reassess the inflation trajectory later."

However, the economists agreed that even if the BOK leaves the benchmark interest rate unchanged at the upcoming meeting, it is likely to send a hawkish signal by hinting at the possibility of a future rate hike.

Analysts noted that the central bank is facing growing pressure to tighten monetary policy as the prolonged conflict in the Middle East fuels inflationary pressure and weakens the Korean won, which recently fell below the psychologically important 1,500 won level against the U.S. dollar.

There are also forecasts that consumer prices could accelerate to around 3 percent in May as rising international oil prices and the weaker won increasingly feed into domestic prices. In April, South Korea's consumer prices rose 2.6 percent from a year earlier, marking the fastest pace of increase in 21 months.

While weak domestic demand has remained a key obstacle to raising interest rates, robust exports fueled by a semiconductor boom are reinforcing expectations that curbing inflation has become a greater policy priority than supporting growth.

Asia's fourth-largest economy expanded 1.7 percent in the first quarter from three months earlier, marking the sharpest quarterly growth in more than five years on the back of strong semiconductor exports.

Recent remarks by BOK officials have further reinforced market expectations for a more hawkish policy stance.

Earlier this month, Ryoo Sang-dai, the BOK's senior deputy governor, said it was time to consider a rate hike, citing the country's stronger-than-expected economic growth in the first quarter.

Kim Jinill, a new BOK board member who took office on May 15, also advocated higher interest rates to prevent a potential financial crisis in his inaugural remarks.

"With the domestic economy continuing to perform better than expected, there is a high likelihood that the central bank will signal openness to a rate hike," Ahn Ye-ha, a senior researcher at Kiwoom Securities Co., said.

"Accordingly, we believe the key focus of this meeting will be the message regarding the future policy path, rather than the decision to keep rates unchanged," he added.

(END)

[ⓒ K-VIBE. 무단전재-재배포 금지]