Bank of Korea Keeps Interest Rates Unchanged as Mideast Uncertainty Persists

By Kwanwoo Jun

South Korea's central bank kept its base rate unchanged for a seventh straight meeting ahead of a leadership change, as Middle East tensions weigh on the trade-reliant economy.

The Bank of Korea on Friday left its benchmark seven-day repurchase rate at 2.50%, in line with expectations. It has held rates steady since a cut in May 2025.

All 27 analysts polled by The Wall Street Journal ahead of the decision had expected no change.

Like many central banks, the BOK is assessing the conflict's impact on the global economy. Earlier this week, India and New Zealand's central banks also held rates, mirroring peers across Asia and the West.

Policymakers are expected to remain cautious in the first half, as the global economy absorbs higher energy prices and supply-chain disruptions.

The U.S. and Iran announced a two-week truce earlier this week for peace talks set to begin on Saturday in Pakistan. But the detente seems fragile, and the economic fallout will take time to repair.

Shipping through the Strait of Hormuz--a global energy supply route--still remains limited despite the cease-fire, squeezing markets for oil, gas and key agricultural and industrial commodities.

As a major importer of oil and gas from the Middle East, South Korea is exposed to the energy market turmoil. Supply disruptions in key chipmaking inputs such as helium could also weigh on the economy.

Stagflation--in which economic growth stalls and inflation spirals--is a growing concern in South Korea, as the fallout from the war stokes upside risks to prices and downside risks to growth.

If the conflict escalates and inflation accelerates, analysts say that could pressure the BOK to tighten policy settings.

Analysts expect outgoing BOK Governor Rhee Chang-yong to refrain from offering clear guidance at his final policy meeting before his term ends on April 20.

Incoming Governor Shin Hyun-song, an Oxford-educated economist and former Bank for International Settlements official, is due to chair his first rate-setting meeting in May.

Write to Kwanwoo Jun at [e-mail]

(END) Dow Jones Newswires

04-09-26 2113ET