The Bank of Korea (BOK) will modify the timing and pace of any future base rate cuts.

The Bank of Korea (BOK) will modify the timing and pace of any future base rate cuts.

Title: Bank of Korea Pauses Easing Cycle Amid Household Debt Concerns

The Bank of Korea (BOK) has announced that it will pause its easing cycle on July 10, as indicated by a Reuters poll of economists. This decision comes amidst growing concerns over household debt and housing market stability. The central bank's base rate is expected to remain at 2.50% during this pause, with further rate cuts anticipated in the coming months to support economic growth [1].

Recent data from the Bank of Korea shows a significant increase in home-backed mortgage loans, with a rise of 5.6 trillion won ($4.1 billion) in May. This uptick in household debt is likely to deter the central bank from delivering back-to-back rate cuts, despite the overall easing path [1].

Stephen Lee, chief economist at Meritz Securities, noted that the concern over housing market stability was always a factor in the BOK's monetary policy decisions. However, the recent surge in Seoul home prices has exacerbated the situation, leading to an acceleration in mortgage loans [1].

The Reuters poll, conducted from July 1 to 7, revealed that 33 economists expected the BOK to hold its base rate at 2.50% on July 10. While a majority of economists expect a further 25 basis point rate cut by the end of this quarter, there is divergence in expectations for the end-of-year policy rate. Some economists predict a rate of 2.25%, while others foresee a reduction to 2.00% by the end of 2025 [1].

Jennifer Kusuma, senior rate strategist at ANZ, expects the BOK to keep the door open for further easing and anticipates a further 25 basis point rate cut this year, taking the policy rate to 2.25% [1].

The decision to pause the easing cycle is also influenced by the slowing economy and the lack of progress on trade deals with the United States. The Reuters poll showed economists reducing their 2025 growth forecast to 0.9%, aligning with the central bank's projection of 0.8%. Inflation is expected to average 2.0% this year and ease slightly to 1.9% in 2026 [1].

Kelvin Lam, senior economist at Pantheon Macroeconomics, expects the prolonged uncertainty to dampen domestic demand growth and believes that trade talks with the U.S. could lead to a higher chance of rates going to 2.00% by the end of this year [1].

The Bank of Korea's pause in its easing cycle is a strategic move to address immediate concerns over household debt and housing market stability, while still maintaining an overall easing path to support economic growth. The central bank will continue to monitor these factors and adjust its monetary policy accordingly.

References:
[1] Rahul Trivedi. (2025). Bank of Korea to pause easing in July amid household debt surge. Reuters. Retrieved from https://www.investing.com/news/economy-news/bank-of-korea-to-pause-easing-in-july-amid-household-debt-surge-reuters-poll-4125574