Bank of Korea Raises Benchmark Rate to 3.00% in Second Consecutive Hike
- BOK hiked rates 25 bps to 3.00% as preemptive inflation control.
- July inflation cooled to 2.8% YoY, but expected above target.
- KRW gained vs USD; USD/KRW hit 11-month low near 1,380.
The Bank of Korea (BOK) on Thursday raised its benchmark interest rate by 25 basis points to 3.00%, marking the second consecutive policy tightening. This decision was largely anticipated by a majority of economists and aims to counter persistent inflation risks alongside stronger-than-expected economic growth. Core inflation in July reached 2.6%, its highest level since December 2023, contributing to the central bank’s move. While the hike was in line with market expectations, limiting immediate significant reaction for the South Korean Won, attention now shifts to Governor Shin Hyun Song’s upcoming press conference. The BOK’s unchanged 2026 inflation forecast of 2.7% suggests the board views current price pressures as persistent rather than accelerating, which could influence expectations for future tightening.
Following the Bank of Korea’s second consecutive benchmark rate hike to 3.00%, the South Korean Won (KRW) gained against the US Dollar (USD), with the USD/KRW pair falling 0.3% to near 1,380, reaching an 11-month low. The hike, which was as expected, comes as South Korea’s inflation cooled to 2.8% Year-on-Year (YoY) in July from 3.2% in June. UBP Head of Fixed Income Research Asia Anitza Nip described the central bank’s action as a preemptive measure and suggested it may not necessarily lead to sustained tightening.
The Bank of Korea’s Monetary Policy Board voted 6-1 to raise the benchmark rate by 25 basis points to 3.00%. Policymakers stated the hike was a preemptive action to prevent inflationary pressures from becoming widespread, noting that inflation is expected to remain above the target level for a considerable time.