Bank of Korea Raises Rates for First Time in Over Three Years

South Korea's central bank raised its benchmark interest rate for the first time in three and a half years, lifting the seven-day repurchase rate by a quarter percentage point to 2.75% in a unanimous decision by its Monetary Policy Board. The move, on 16 July, ended 14 consecutive months without a change and effectively reversed the easing cycle that began in late 2024, marking the bank's first increase since January 2023. Governor Shin Hyun-song said the board would keep all options open and declined to commit to a timetable for further action, but signalled that additional hikes could follow as inflation, housing prices and household debt remain elevated. Two forces have driven price pressures: higher global oil costs linked to Middle East tensions, and a resilient export sector, led by semiconductors, that has supported domestic demand. The bank expects inflation to stay above its 2% target through 2027 and has trimmed its 2026 growth forecast. The decision runs counter to the broader global drift toward rate cuts seen through much of the past year.