Sign Up Log in

    DBS Bank forecasts that the Bank of Korea will maintain the base rate at 2.50%

    by VT Markets
    /
    Jan 30, 2026
    DBS Bank’s Group Research expects the Bank of Korea (BOK) to keep its base rate at 2.50% until 2026. The report anticipates that inflation will drop in January due to weaker demand and steady supply. The BOK has signaled that it has finished cutting rates, based on current economic conditions.

    No Rate Hike Expected

    The BOK says there is no need to raise rates now because inflation is low. They plan to maintain the base rate at 2.50% for the rest of the year. This outlook comes from the FXStreet Insights Team, who gathered insights from market data and trends. The Bank of Korea has clearly stated that they are done with rate cuts for now. We expect the base rate to stay at 2.50% until 2026. This brings a level of predictability to the Korean markets for the near future. This stability is supported by cooling inflation, which was at 2.2% in December 2025. This figure is well within the bank’s comfort range and alleviates any need to raise rates. With only modest economic growth, there’s little reason for the bank to change its approach.

    Market Reactions and Strategies

    This outlook suggests that volatility in Korean assets will stay low. The KOSPI 200 Volatility Index (VKOSPI) has been stable, a trend that began in late 2025. This environment makes options strategies that benefit from stability, like selling straddles, more appealing in the coming weeks. The bond market has already adjusted to this extended pause, with the 3-year government bond yield steady at around 2.45% for several months. This clarity simplifies interest rate futures. Carry trades with the Korean won could offer consistent, though not extraordinary, returns compared to currencies with lower rates. For the Korean won, this policy reduces the chance of large price swings against the dollar. The USD/KRW exchange rate became more stable after the BOK stopped cutting rates in August of last year. Therefore, implementing range-bound derivatives strategies on this currency pair might be a wise choice. Create your live VT Markets account and start trading now.

    here to set up a live account on VT Markets now

    In This Article

    see more

    Back To Top
    server
    Click Click Click Click Click
    Follow us on

    Hello there 👋

    How can I help you?

    Chat with our team instantly

    Live Chat

    Start a live conversation through...

    • Telegram
      hold On hold
    • Coming Soon...

    Hello there 👋

    How can I help you?

    telegram

    Scan the QR code with your smartphone to start a chat with us, or click here.

    Don’t have the Telegram App or Desktop installed? Use Web Telegram instead.

    QR code