Rhee: FX, market volatility, Seoul home prices need monitoring

Rhee: FX, market volatility, Seoul home prices need monitoring

Rhee: FX, Market Volatility, Seoul Home Prices Need Monitoring

The Bank of Korea (BOK) maintained its benchmark interest rate at 2.5% for the sixth consecutive meeting on February 26, 2026, citing the need to balance inflation control, financial stability, and external risks. Governor Rhee Chang-yong emphasized the central bank's focus on monitoring foreign exchange (FX) volatility, housing market dynamics in Seoul, and broader economic uncertainties.

FX Volatility and Capital Flows The Korean won has depreciated to a 17-year low, trading near 1,450 won per dollar, driven by domestic investors' strong appetite for U.S. equities. Retail investors held nearly $171 billion in overseas stocks as of January 29, exacerbating supply-demand imbalances in the FX market. Governor Rhee acknowledged the limitations of recent stabilization measures, including tax incentives for repatriating capital gains, and highlighted the need for a coordinated approach to address persistent dollar demand. The National Pension Service's (NPS) overseas investments, which have grown to $350 billion under a U.S. trade agreement, also pose challenges, with policymakers seeking to establish a "new framework" to align hedging strategies with macroeconomic stability.

Housing Market Pressures Seoul's housing prices have risen for 42 consecutive weeks, despite government interventions such as macroprudential policies and cooling measures. Elevated household debt and speculative activity in the Seoul metropolitan area remain key risks to financial stability. Governor Rhee reiterated the central bank's caution, noting that policy decisions will depend on the trajectory of housing prices and debt levels.

Market Volatility and Global Risks Global financial markets face heightened uncertainty due to divergent monetary policies, fiscal risks in major economies, and AI-driven investment trends. The BOK projects 2026 GDP growth at 2.0%, supported by strong semiconductor exports and domestic consumption, but warned of downside risks from trade tensions and geopolitical shifts. Inflation is expected to remain near the 2% target, though exchange rate fluctuations and cost pressures could introduce volatility.

Governor Rhee stressed the importance of calibrated policy responses, enhanced communication, and structural reforms to address long-term growth challenges. The BOK's next policy meeting will assess evolving conditions amid a complex domestic and global landscape.

(https://www.bis.org/review/r260105a.htm): Bank of Korea New Year Speech (2026)
(https://en.yna.co.kr/view/AEN20260226004900320): BOK Monetary Policy Statement (Feb 26, 2026)
(https://finance.yahoo.com/news/analysis-koreas-fight-fx-stability-210453167.html): Reuters Analysis (Feb 5, 2026)
(https://informaconnect.com/igm/article/bank-of-korea-holds-policy-rate-steady-at-25-amid-housing-and-currency-concerns/): IGM Report (Nov 27, 2025)