The Bank of Korea raised its Base Rate by 25 basis points to 3.00% on Thursday, delivering the country's second consecutive rate hike and citing mounting inflationary pressure. The move takes the policy rate to its highest level since January 2025 and marks the first back-to-back increases from the central bank since early 2023.
The Monetary Policy Board's decision, announced in the Bank of Korea's release, lifts the benchmark from 2.75%. Six of the seven board members backed the increase, with Hwang Kun-il dissenting in favour of holding at 2.75%. The bank said it aimed to prevent inflationary pressures from becoming widespread through pre-emptive action, while paying attention to financial stability risks.
CONSECUTIVE HIKES SIGNAL RESOLVE
The back-to-back rate rises are the first from the central bank since early 2023, ending a prolonged period during which the Board had been either on hold or gradually easing policy.
The move follows a 25 basis point increase in July, and the two hikes have together added 50 basis points to the base rate.
HIGHEST SINCE JANUARY 2025
At 3.00%, the Base Rate now stands at its highest level since January 2025. Consumer prices rose 2.8% year on year in July, while core inflation reached 2.6%, its highest since December 2023.
The central bank cited mounting inflationary pressure as a driver of the decision. Officials pointed to elevated oil prices, Middle East tensions and a stronger-than-expected economic recovery. The bank raised its 2026 growth forecast to 3.3% from 2.6% and projected inflation of 2.7% for 2026 and 2.3% for 2027.
The Bank of Korea's next rate decision is scheduled for 22 October 2026.