BANK OF KOREA reiterated a hawkish stance in its semiannual Financial Stability
Report, saying accelerating Seoul-area house prices, expanding household debt
and greater leverage in asset purchases could amplify financial imbalances and
justify a further rate increase at an appropriate time. The report said the
financial system remains broadly stable thanks to strong growth, resilience
financial institutions and a healthy external payments position, but warned
credit risk is rising among vulnerable households and firms despite banks’
intact capital and liquidity buffers. It noted the benchmark rate has been held
at 2.5% since H2 2025 and, given inf pressure, economic conditions and
financial-stability risks, the bank considers it necessary to raise the policy
rate at an appropriate time.
