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

The Bank of Korea raised its benchmark interest rate for the first time in more than three years, lifting the base rate by a quarter percentage point to 2.75% on July 16 in a unanimous decision. The move reversed an easing cycle that had begun in October 2024 and ended 14 consecutive months without a change, marking the bank's first hike since January 2023. Governor Shin Hyun-song, who took charge of the central bank in late April, said policymakers acted decisively against inflation, which the bank expects to remain above its 2% target through 2027, and warned that housing prices and household debt remain elevated. Two forces drove the decision: global oil prices climbing on Middle East tensions and feeding through to energy costs, and a resilient export sector, led by semiconductors, that has supported domestic demand. The bank also revised up its 2026 growth forecast. Shin signalled that further increases could follow but declined to commit to a timetable, saying the bank was keeping all options open and would respond to incoming data. The decision runs counter to the broader global drift toward rate cuts.