"Further Assessment Needed on War-Induced Supply Shock and Price Impact"... Reasons Behind 'Seventh Consecutive Rate Freeze'

April Minutes of the Bank of Korea Monetary Policy Committee

The Monetary Policy Committee (MPC) of the Bank of Korea decided to freeze the base rate at 2.50% per annum for the seventh consecutive time on April 10, 2026. This decision was made to further monitor the potential impact of the Iran war on domestic supply and the resulting possibility of rising inflation.

Lee Chang-yong, Governor of the Bank of Korea, is striking the gavel at the Monetary Policy Committee plenary session held at the Bank of Korea headquarters in Jung-gu, Seoul, on April 10, 2026. Photo by Kang Jin-hyung

According to the April MPC meeting minutes released by the Bank of Korea on April 28, all six committee members except for Governor Lee Chang-yong agreed to hold the base rate steady.

The most cited reason for maintaining the rate was the need to further assess the supply shock triggered by the Iran war and its potential impact on upward pressure on prices.

One committee member who supported the freeze stated, "Although international oil prices have surged and supply disruptions have occurred as a result of the Middle East conflict, it is still difficult to predict whether the supply shock will lead to a sustained increase in core inflation and inflation expectations, thereby causing a shift in the price stability trend. It is necessary to monitor the situation very carefully for the time being before making any decisions."

Another member commented, "For now, a wait-and-see approach is desirable," adding, "It is better to observe the situation in the Middle East, the economic growth path, and price trends before deciding on any future changes to the base rate." Another member noted, "This is a time when a more cautious monetary policy response is required than ever before."

Concerns were also raised about upward pressure on prices. Another committee member said, "Since the impact of a weak won and high oil prices on inflation spreads with a time lag, it is appropriate to freeze the rate at this meeting while observing the situation in the Middle East, the growth trajectory, and price trends before considering any future rate changes."

There was also a suggestion that the policy focus should be shifted from supporting economic recovery and financial stability to ensuring price stability. One member stated, "Until the first half of last year, the focus was on economic recovery, and until the beginning of this year, on financial stability. However, for the time being, we should prioritize easing inflationary pressure. Major countries are also seeing a marked decline in expectations for monetary policy easing, and signs of a shift from existing paths are becoming clear."

The prevailing view was that it is still too early to say the housing market has entered a stable phase. One committee member noted, "While the increase in household debt has continued to slow, and the overall upward trend in housing prices in the Seoul metropolitan area has eased due to the government's stricter regulations on multiple home ownership, it is still necessary to monitor whether a stable trend has been established, given the strong price increases in some non-regulated areas and the widening rise in jeonse prices."

Regarding future monetary policy, MPC members emphasized the need to closely examine the duration and impact of the global supply shock, changes in expected and core inflation trends, and the direction of major countries' monetary policies. One member remarked, "While decisions should consider the trade-offs among price stability, growth, and financial stability, the top priority must be price stability, and efforts must be strengthened to communicate with economic agents in order to anchor inflation expectations."

This content was produced with the assistance of AI translation services.