Seoul, April 10 (NationPress) The central bank of South Korea decided to maintain its benchmark interest rate on Friday, reflecting a cautious approach due to the prevailing uncertainties in the Middle East which raise concerns over inflation, currency devaluation, and a slowdown in economic growth.

In a decision that was widely expected, the Bank of Korea's Monetary Policy Board kept the key rate steady at 2.5 percent during its recent meeting in Seoul, as reported by Yonhap news agency.

This marks the seventh consecutive time the rate has been held steady, even as the bank continues its monetary easing cycle.

The BOK initiated its monetary easing strategy in October 2024, reducing the benchmark interest rate by a total of 100 basis points from 3.5 percent to stimulate economic growth, but has kept it at the current level since July 2025.

In a statement, the BOK emphasized the significant uncertainty surrounding future developments in the Middle East, highlighting the rising inflationary pressures, potential growth risks, and increased volatility in financial and foreign exchange markets due to the ongoing war in the region.

The decision to freeze the rate was unanimous, as noted by the BOK.

"Today’s decision was not merely a delay in judgment, but reflects the necessity to closely monitor the progression of the Middle East conflict and its potential repercussions before adjusting policy. If the supply shock proves to be temporary, we will refrain from making interest rate changes," stated BOK Governor Rhee Chang-yong during a press briefing.

Experts believe that the BOK is facing a challenging policy dilemma as the conflict in the Middle East, which escalated in late February following U.S.-Israeli strikes on Iran, has grown into a larger regional crisis, exacerbating inflationary pressures and foreign exchange instability.

Consumer prices increased by 2.2 percent in March compared to the previous year, up from 2 percent in February, primarily driven by a spike in global oil prices due to supply disruptions.

Although inflation remains close to the 2 percent target, the modest rise in March was largely supported by the government's fuel price cap and reduced volatility in fresh food prices. The BOK has cautioned that further upward pressure could materialize as the effects of the Middle East conflict unfold.

"Consumer price inflation for the year is projected to significantly surpass the February forecast of 2.2 percent," the BOK stated.

Recently, the Korean won has experienced considerable depreciation, hovering around the crucial 1,500 level, its lowest since 2009 when the nation faced the global financial crisis.

Concerns regarding inflation and further currency depreciation remain as a fragile two-week ceasefire between the U.S. and Iran keeps uncertainty elevated, while analysts suggest that global oil prices are unlikely to revert to pre-conflict levels. Additionally, the local currency is under pressure from ongoing net selling of domestic stocks by foreign investors.

A reduction in interest rates could lead to capital outflows, which might further weaken the currency, experts warn.