The Bank of Korea's Monetary Policy Board kept the base rate unchanged at 2.50 percent. Inflation pressure has risen in the wake of the war in the Middle East, but the board judged uncertainty to be high and decided to maintain the current level for now while monitoring economic activity and inflation trends.

The board said on May 28 it had decided to keep the base rate unchanged in its monetary policy statement.

The board assessed that domestic growth is expanding more than expected, supported by strong semiconductor-led exports, increased investment and solid consumption. It sharply raised its growth forecast for this year to 2.6 percent from 2.0 percent.

It also forecast that inflation will rise more, driven by factors including higher international oil prices. It put this year's forecasts for consumer inflation and core inflation at 2.7 percent and 2.4 percent, respectively.

It assessed that financial markets have seen the won-dollar exchange rate rise to around 1,500 won and increases in housing prices in the Seoul metropolitan area broaden.

The board said it will decide the timing of any base rate increase while comprehensively assessing inflation pressure, the economic trend and financial stability conditions.

Five board members agreed with the latest rate decision, while member Yong-seong Jang (장용성) and member Sang-dae Yoo (유상대) expressed dissenting views that the base rate should be raised to 2.75 percent.