South Korea Holds Key Rate at 2.75% Amid Economic Concerns.

Seoul, South Korea - South Korea's central bank maintained its benchmark interest rate at 2.75% on Thursday, citing intensified downside risks to economic growth despite stable inflation.

The Bank of Korea's Monetary Policy Board decided to leave the Base Rate unchanged as it assesses domestic and external conditions amid high uncertainty regarding U.S. tariff policies, government stimulus measures, exchange rate volatility, and trends in household loan demand.

"While inflation remains stable, downside risks to economic growth have intensified due to the sluggishness of economic activities in the first quarter and the deterioration in global trade conditions," the Bank of Korea said in its monetary policy statement.

According to the central bank, South Korea's economic growth has been weaker than expected. 

Both domestic demand and exports have slowed due to prolonged political uncertainties and deteriorated trade conditions. 

The GDP growth outlook is expected to fall below the February forecast of 1.5%.

The central bank reported that consumer price inflation was 2.1% in March and core inflation was 1.9%. 

It maintained its previous forecasts of 1.9% for headline inflation and 1.8% for core inflation this year, noting that inflation is expected to remain stable at around 2%.

Financial markets have experienced increased volatility, with the Korean won-to-U.S. dollar exchange rate fluctuating sharply in response to U.S. tariff policy announcements, China's retaliatory actions, and securities investment fund flows. 

Stock prices declined significantly before partially rebounding, while long-term Korean Treasury bond yields fell considerably.

The housing market in Seoul exhibited increased activity, characterized by rises in both prices and transaction volumes. 

However, this trend slowed following regulatory interventions, such as the redesignation of the "Areas Subject to Permission of Land Transaction" regulations.

Despite holding rates steady at this meeting, the central bank indicated it would "maintain its rate cut stance to mitigate downside risks to economic growth" while carefully monitoring changes in the domestic and external policy environment before making further rate adjustments.

The Board emphasized that it will continue to conduct monetary policy to stabilize consumer price inflation at the target level over the medium term while remaining attentive to economic growth and financial stability.