Bank of Korea Holds Interest Rate at 2.5% Amid Weak Won and Real Estate Surge

Bank of Korea Maintains 2.5% Benchmark Rate Despite Market Pressures

On January 15, 2026, the Bank of Korea (BOK) decided to hold its benchmark interest rate steady at 2.5% for the fifth consecutive meeting, a move largely expected by economists. This decision reflects the central bank's cautious approach amidst a weakening Korean won and a real estate market that shows signs of overheating in key areas such as Seoul. The BOK's neutral policy stance, marked by a pause after an aggressive rate-cutting cycle post-2024, aims to balance economic recovery with inflation control and currency stability.

Rising Home Prices in Seoul Add to BOK's Challenges

The decision to maintain the current rate comes against the backdrop of rising property prices, particularly in Seoul, where the average apartment price rose by 0.18% in the first week of January 2026, marking the 48th consecutive week of an upward trend. According to Korea JoongAng Daily, this price surge has become a focal point of the BOK's monetary policy deliberations. A stable interest rate is crucial to manage the risk of a real estate bubble, which could have broader economic implications.

Global Economic Dynamics and Korean Won's Weakness

The Korean won has depreciated significantly, adding another layer of complexity to the BOK's decision-making process. The currency's weakness, as noted by The Korea Times, stems partly from global economic conditions and the comparative strength of the U.S. dollar. This devaluation impacts import costs and inflation, pushing consumer prices up by 2.3% year-over-year in December 2025, above the BOK's target of 2%.

Economist Predictions Align with BOK's Rate Decision

A recent survey indicated that 96% of bond market experts anticipated the BOK would keep the rate unchanged, aligning with the central bank's decision to focus on economic stability over aggressive rate adjustments. This consensus highlights the shared understanding of the challenges facing South Korea's economy, which include managing the interest rate gap with the U.S., currently at 1.25 percentage points, as reported by ING Think. The BOK's strategy is to prevent capital outflows that could further weaken the won.

Real Estate Investment Implications in a Steady Rate Environment

For real estate investors, the steady interest rates provide a window of opportunity in a market characterized by low borrowing costs. As noted by CBRE, investors might leverage this period to secure financing options at favorable rates, particularly for properties in high-demand locations. However, caution is advised as regulatory measures to curb speculative buying remain a potential market disruptor.

Future Implications for South Korea's Economic Path

Looking forward, the BOK's prolonged pause on rate changes suggests a cautious optimism about South Korea's economic trajectory. As global demand for semiconductors boosts GDP growth projections to 2.0% in 2026, up from 1.2% in 2025, according to ING Think, the focus will remain on balancing growth with financial stability. Market participants will closely watch for any shifts in policy that could signal a return to rate hikes if inflationary pressures persist.

Metric	Reading	Change	Notes
Interest Rate	2.5%	Unchanged	5th consecutive meeting
Apartment Price in Seoul	+0.18%	Weekly	48-week consecutive rise
Consumer Price Index	2.3%	Year-over-Year	Above 2% target

• Monitor the impact of BOK's interest rate on housing affordability.
• Consider the effects of a weak won on import costs and inflation.
• Stay informed about government regulations affecting property investment.