Citing moderate inflation still modestly above target, exchange rates and an uncertain outlook riddled with trade tensions, the Bank of Korea on Thursday voted to keep its key policy rate unchanged at 2.75%.

Given "the high uncertainty stemming from shifting US tariff policies and domestic stimulus measures, and the need to observe exchange rate volatility and household lending trends more closely, we decided it would be appropriate to maintain the current rate," said the nation's central bank, in a prepared statement.

In the latter half of 2024 and through February 2025, the Bank of Korea lowered its key rate from 3.50% to the current 2.75%, as inflation moderated but the nation's economic growth rate paled.

Among concerns the Bank of Korea faced in the latest policy session was a depreciating national currency.

The South Korea won, which had traded for 1,308 to the US dollar in September of 2024, traded for 1,458 to the greenback by mid-April, although it strengthened somewhat in recent days ahead of the Bank of Korea decision.

In general, central banks will move to more-restrictive monetary policies to to prop up a national currency.

In its prepared statement, The Bank of Korea said inflation is not a major concern, though still marginally above its 2% annual target. "Inflation has remained stable, with consumer price inflation and core inflation (excluding

changes in food and energy prices from the CPI) recording 2.1% and 1.9%, respectively, in March, said the central bank.

South Korea is expected to post inflation at 2% through 2025, added the Bak of Korea.

However, the central bank did suggest that even its tepid 1.5% gross domestic product (GDP) growth forecast for 2025 might be high, given trade tensions and rising tariffs.

"The (GDP) growth rate for this year is expected to fall below the February forecast of 1.5%, reflecting sluggish performance in the first quarter. Additionally, US tariff policies have proven significantly stronger than initially projected, posing further downside risks to economic growth," advised the central bank.

The Bank of Korea next meets to decide monetary policy on May 29.