South Korea central bank raises key rate for first time since 2023
7 reported
South Korea’s central bank raised its key interest rate on Thursday for the first time in more than three years, according to a report from ABC News. The Bank of Korea increased its benchmark policy rate by a quarter percentage point from 2.5% to 2.75% following a monetary policy meeting. The move aims to tighten money supply to combat inflation worsened by the intensifying war in the Middle East and slow the growth of the country’s high household debt. The bank had kept rates steady or lowered them in recent years despite concerns about soaring household debt and real estate prices, prioritizing support for the trade-dependent economy amid geopolitical turmoil and U.S. tariff hikes. Policymakers now see room to increase borrowing costs with the economy performing better than expected, thanks to robust semiconductor exports driven by the global boom in artificial intelligence spending. The government on Tuesday raised the country’s 2026 growth outlook to 3%, which would be the highest annual growth rate since 2021. Bank of Korea Governor Shin Hyun Song said all seven members of the monetary policy committee supported the rate hike, citing trends in growth, consumer prices, and financial stability.
What’s reported
The Bank of Korea raised its benchmark policy rate by a quarter percentage point from 2.5% to 2.75% on Thursday.
This is the first rate hike since January 2023.
The move aims to combat inflation worsened by the war in the Middle East and slow household debt growth.
Consumer price inflation exceeded 3% in both May and June, above the bank’s 2% target.
The government raised the 2026 growth outlook to 3%, the highest since 2021.
All seven members of the monetary policy committee supported the rate hike.
Governor Shin Hyun Song said the timing and pace of any additional rate hikes would depend on incoming data.
Key figures
Shin Hyun Song, Governor of the Bank of Korea
Sources: abcnews.com
