Key facts
- The Bank of Korea raised its benchmark interest rate by 0.25 percentage points to 3.00%.
- This marks the second consecutive rate hike by the BOK.
- The decision was made to curb mounting inflationary pressure.
- Consumer prices rose 2.8% in July, while core inflation increased 2.6%.
- The BOK revised its 2026 growth forecast upward to 3.3%.
The Bank of Korea (BOK) raised its benchmark interest rate by 0.25 percentage points to 3.00% on Thursday, marking its second consecutive hike. This decision, made at a regular rate-setting meeting, aims to curb mounting inflationary pressures.
The central bank has signaled a continued hawkish stance due to rising oil prices, renewed uncertainty in the Middle East, and a better-than-expected economic recovery. South Korea's consumer prices rose 2.8% in July year-on-year, falling below the 3% mark for the first time in three months but remaining above the BOK's 2% target. Core inflation, excluding volatile food and energy prices, advanced 2.6% year-on-year in July, the sharpest increase since December 2023.
Elevated international crude prices, driven by escalating military tensions between the United States and Iran, also contribute to inflationary concerns. On the other hand, the South Korean economy is projected to grow by 3% or more in 2026, the first time in five years, with the economy having already expanded 3.8% in the first six months of the year. The BOK revised its 2026 growth forecast upward to 3.3% from 2.6%, with a 2.9% outlook for 2027.