South Korea central bank holds rate at 2.5% amid inflation

South Korea's central bank held its benchmark interest rate steady on Thursday, extending a pause in monetary policy as it assesses the economic impact of conflict in the Middle East while confronting persistent inflation and a weakening currency. The Bank of Korea's monetary policy board voted to keep the seven-day repurchase rate at 2.50 percent, a decision widely anticipated by financial markets.

This meeting was the first chaired by new Governor Shin Hyun-song, who took office last month, and signals a cautious approach amid competing economic pressures. While the board held rates, the decision included notable hawkish signals. Two of the seven board members dissented, voting for an immediate rate increase. Furthermore, an updated projection from board members showed that 10 of 21 policy rate forecasts point to a rate of 3.00 percent within the next six months.

The central bank significantly revised its economic forecasts, raising its inflation projection for the year to 2.7 percent from 2.2 percent, citing spillover effects from elevated global oil prices linked to the Middle East conflict. It also upgraded its growth forecast to 2.6 percent from 2.0 percent, reflecting...