South Korea Raises Interest Rates for First Time in More Than Three Years

South Korea’s central bank raised its benchmark interest rate by 25 basis points on Thursday, marking its first rate hike in more than three years.

The Bank of Korea (BOK) held a meeting of its Monetary Policy Board and raised the benchmark rate from 2.5 percent to 2.75 percent, a BOK official told AFP.

Since May, the central bank has increasingly shifted toward a tighter monetary policy stance, citing persistent inflation, a weaker won and an economy supported by strong semiconductor exports.

The combination of solid economic growth, rising housing prices and high household debt has further strengthened the case for a rate increase.

South Korea’s economy expanded at its fastest pace in nearly six years during the first quarter. BOK Governor Shin Hyun-song has also said inflation is likely to remain above the central bank’s target for a considerable period.

Consumer prices rose 3.2 percent in June from a year earlier, partly driven by higher energy costs and supply chain disruptions linked to conflicts in the Middle East.

Thursday’s rate hike was the first since January 2023, when the central bank raised its policy rate by 25 basis points to 3.5 percent as part of its post-pandemic monetary policy normalization cycle.