The Bank of Korea's Monetary Policy Committee decided to maintain the base rate at 2.50% per annum at its monetary policy direction meeting on the 28th. This was the first monetary policy meeting held since the inauguration of Governor Rhee Chang-yong. With this freeze, the base rate will be locked at 2.50% for about a year, from July 10 of last year until the next meeting on July 16. This marks the eighth consecutive freeze, following those in July, August, October, and November of last year, and in January, February, and April of this year.

The Monetary Policy Board cited the uncertainty of the Middle East situation as a major variable in its decision to freeze the rate. The judgment is that volatility in the financial and foreign exchange markets could change depending on the outcome of US-Iran ceasefire negotiations and whether the Strait of Hormuz is opened, necessitating a further review of the potential ripple effects. The possibility of market shocks expanding once again in the event of an escalation was not ruled out. The BOK had previously cut interest rates in February and May of last year to stimulate the economy, but shifted to a freeze stance in the second half of the year as rising housing prices in the metropolitan area, expanding household debt, and the burden of a high exchange rate coincided. In April of this year as well, the bank locked the interest rate, simultaneously considering the upward pressure on prices and downward pressure on growth caused by the war in the Middle East.

However, the overall tone of monetary policy is gradually shifting in weight toward a 'hike.' BOK Deputy Governor Yoo Sang-dae recently stated that it is "a time to consider an interest rate hike," and former Monetary Policy Board member Shin Seong-hwan also expressed a cautious stance on rate cuts just before his retirement, citing inflationary burden. Monetary Policy Board member Kim Jin-il also mentioned the possibility of an 'insurance hike' immediately after taking office.

The surge in international oil prices and expanding inflationary pressure are adding weight to the arguments for a hike. The producer price index in April rose by 2.5%, recording the largest increase since February 1998, while raw material prices skyrocketed by 28.5%, reaching an all-time high since statistics began to be compiled. The consumer price inflation rate, which had stabilized at 2.0% in January and February, is trending upward at 2.2% in March and 2.6% in April, hovering above the target rate of 2.0%.

On the other hand, growth indicators have clearly improved. The real gross domestic product (GDP) growth rate for the first quarter was 1.7% compared to the previous quarter, significantly exceeding the BOK's initial forecast of 0.9%. The annual growth forecast for this year was also revised upward from 2.0% to 2.6%. The stock market's strong performance, driven by the robust earnings of Samsung Electronics and SK Hynix, is also continuing. The assessment is that the need for economic stimulus has diminished, while demand-side inflationary pressure has increased. The exchange rate and real estate prices are also cited as factors of instability. The won-dollar exchange rate dropped to the upper 1,440 won range early this month before approaching 1,520 won during intraday trading on the 22nd. Seoul apartment transaction prices rose by 0.31% compared to the previous week as of the third week of May, expanding the margin of increase for the third consecutive week.

Experts are also paying close attention to the signals of a potential hike amidst the rate freeze. In a Yonhap News survey, all six experts predicted this freeze, and four of them forecasted a rate hike within the year. Improvements in exports and domestic consumption, rising real estate prices, and upward inflationary pressure are cited as justifications for a hike. The market is closely watching to see whether Governor Rhee will hint at the possibility of a hike regarding the future direction of monetary policy during his press conference.