Bank of Korea Raises Rate by 25bps to 3.00%
The Bank of Korea raised its benchmark interest rate by 25 basis points to 3.00% on August 27, marking a second consecutive hike to counter persistent inflation. The rate is now at its highest since January 2025. One of seven board members dissented, voting to hold. July core inflation hit 2.6%, while headline inflation eased to 2.8%.
The Bank of Korea announced on August 27 that it would raise its benchmark interest rate by 25 basis points, from 2.75% to 3.00%. This marks the second consecutive meeting with a rate increase, aimed at addressing inflation that has remained above target levels. Following the hike, the benchmark rate has reached its highest level since January 2025. The decision was not unanimous, as one of the seven members of the central bank's monetary policy committee voted to keep the rate unchanged.
In July, South Korea's core inflation rate rose to 2.6%, the highest level since December 2023. While the headline inflation rate eased slightly to 2.8%, it has been climbing steadily since February. In June, Seoul housing prices rose 2.5% month-on-month, marking the largest single-month increase in five years.
The central bank maintained its inflation forecasts for 2026 and 2027 at 2.7% and 2.3%, respectively. Uncertainties remain regarding the extent of expansion in the semiconductor sector, developments in the Middle East, and changes in the trade environment.