The Bank of Korea has kept its interest rate steady at 2.5%, which matches expectations after a thorough review. For South Korea’s economy, GDP growth is forecasted to rise by 0.9% in 2025 and by 1.6% in 2026. Inflation predictions have also changed, with the bank expecting it to be 2.0% in 2025, slightly up from 1.9%. By 2026, inflation is projected at 1.9%, which is just above the previous estimate of 1.8%.

Governor Rhee’s Press Conference

Governor Rhee Chang-yong will hold a press conference at 0210 GMT, or 2210 US Eastern Time. This event could provide more details about the bank’s choices and what the future holds for the economy. While the Bank of Korea’s decision to keep rates at 2.5% is not surprising, the new growth forecasts are concerning. The GDP growth prediction for 2025 has been cut to only 0.9%, indicating worries about the economy’s stability. This low growth forecast raises the chance of future rate cuts, even with inflation at the target of 2.0%. We should also expect the Korean Won to weaken against the US dollar. Since the US Federal Reserve has its rates around 3.75% as of last month, the difference makes holding dollars more appealing. If the Bank of Korea hints at easing its monetary policy, the pressure on the Won may increase. The outlook for the KOSPI index appears tough for now. The significant reduction in the growth forecast suggests lower corporate earnings, especially after a 5.2% drop in exports in July 2025. Although future rate cuts might provide some support, the immediate challenge comes from a slowing economy.

Market Volatility Expectations

The governor’s press conference today is a key event that could create market volatility. People will closely watch his tone for clues on when to expect potential easing. Options on the USD/KRW pair could be used to prepare for a big price shift, as his comments might influence the currency significantly. This situation feels like what we witnessed in late 2019, just before the pandemic, when declining global demand led the Bank of Korea to start cutting rates. Back then, early signals hinted at a change in policy months before it happened. We may be entering a similar phase where the central bank’s guidance heavily influences the market. Create your live VT Markets account and start trading now.

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