Bank of Korea delivers back-to-back rate hikes as core inflation stays elevated
The Bank of Korea has raised interest rates by 25 basis points to 3% in response to persistent core inflation and strong economic growth. The central bank signaled that rates may need to remain elevated for a considerable time due to uncertainties in global oil prices and domestic demand.
Why it matters
As Asia's fourth-largest economy, South Korea's monetary policy shifts provide critical signals for regional market stability and global export trends.
South Korea's central bank on Thursday raised rates for a second straight time in its bid to cool rising prices, after core inflation reading hit the highest level last month since December 2023.
The Bank of Korea hiked rates by 25 basis points to 3%, its highest since January 2025 and in line with expectations.
The BOK said in its statement that while South Korea's economy continued to grow at a stronger-than-expected pace, inflation is likely to remain above the target level for a "considerable time."
Core inflation in Asia's fourth largest economy climbed to 2.6% in July , while the headline inflation rate in July cooled slightly to 2.8%, after rising for four straight months since the Iran war started in February.
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