The Kospi Index retreated more than 1% on Thursday after the Bank of Korea held interest rates steady at 2.50%, as widely expected, but sharply raised its inflation forecast for the year. The decision immediately pressured South Korean equities and government bonds, with the 10‑year yield climbing to 4.105%. The index fell to KRW 8,133, down from the week’s high of KRW 8,480, as the central bank lifted its inflation estimate from 2.2% to 2.7% and bumped the GDP growth projection to 2.6% from 2.0%, buoyed by a first‑quarter expansion of 1.7% — the fastest in six years.
The hawkish outlook fueled expectations that the bank will begin hiking rates as early as September. Economists polled by Reuters anticipate such a move, which would aim to curb the weakening South Korean won. Higher interest rates tend to weigh on stock valuations, explaining why Kospi heavyweights like Samsung Electronics dropped 1.47%, even as SK Hynix managed a 1.34% gain on semiconductor demand hopes. The index found technical support at KRW 8,048, staging a break‑and‑retest pattern that still leaves bulls eyeing a potential run to KRW 10,000 should the AI‑chip theme reignite.
Asian markets traded mixed overall. Japan’s Nikkei 225 and Hong Kong’s Hang Seng slipped, while Shanghai was flat, as the lack of resolution in US‑Iran talks kept investors on edge. President Trump’s remarks that he was not concerned about midterm elections and remained dissatisfied with ceasefire offers sustained crude oil prices near $90–$96 a barrel, a critical cost factor for import‑reliant South Korea. The won steadied, but the combination of domestic monetary tightening prospects and external geopolitical uncertainty tempered the Kospi’s earlier tech‑led surge that had lifted it over 1.5% intraday.
