Overview
- The Bank of Korea kept its policy rate at 2.5 percent at its May 28 policy meeting but the Monetary Policy Board split five votes to hold and two votes for a 25 basis-point rise.
- Governor Shin Hyun-song unveiled a dot-plot showing many officials expect rates around 2.75 percent and some up to 3.25 percent, which markets read as a clear bias toward future hikes.
- The central bank raised its 2026 growth forecast to 2.6 percent because of a strong semiconductor export cycle and revised up inflation to 2.7 percent, citing higher global oil prices from the Middle East conflict.
- Markets reacted to the guidance with falls in three-year treasury futures and a weaker KOSPI while the won slid near the 1,500-per-dollar level and the BOK warned it will act against one-sided currency moves.
- The policy shift reflects a wider move by major central banks from easing to tightening as energy-price shocks increase imported inflation risks and give the BOK scope to prioritise price stability.