Bank of Korea raises rates to 2.75% in first hike in over three years
The Bank of Korea has raised its benchmark policy rates by 25 basis points to 2.75%, marking the first hike since January 2023, in response to persistent inflation and a depreciating won. This move aligns with economist estimates and aims to stabilize prices, despite strong economic growth in the first quarter.
Why it matters
This interest rate hike by a major Asian economy has significant implications for global financial markets, South Korea's economic stability, and the purchasing power of its currency, affecting businesses and consumers worldwide.
South Korea's central bank hiked benchmark policy rates on Thursday, raising them for the first time since January 2023 as inflation in the country creeps up. The Bank of Korea's 25 basis point hike that increased rates to 2.75% was in line with median estimates from economists polled by Reuters.
The move comes as inflation is expected to remain above the BOK's target of 2% "for a considerable time," the central bank said in its statement. "Inflation is projected to remain elevated for some time as the impact of the rise in energy prices feeds through with a time lag."
Headline inflation in South Korea in June rose to its highest since 2023, coming in at 3.2%.
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