Bank of Korea raises key rate to 2.75 % for first time since 2023

The Bank of Korea raised its benchmark policy rate by 0.25 percentage points to 2.75% on July 15. The decision marked the first increase since January 2023 and came after the bank had held rates steady or cut them in prior years. All seven members of the monetary policy committee supported the hike.

Governor Shin Hyun Song said the move addressed trends in growth, consumer prices and financial stability. Consumer price inflation exceeded 3% in both May and June, well above the bank’s 2% target. Higher energy costs linked to the Middle East conflict and a weaker won contributed to the rise.

The government raised its 2026 economic growth forecast to 3% on July 13. That pace would be the strongest annual expansion since 2021, supported by semiconductor exports tied to global artificial intelligence demand. Shin said inflation is expected to stay above target for a considerable period and that risks to financial stability remain.

He added that the timing and pace of any further rate increases would depend on incoming data. The bank had previously signaled in May that rates should rise at an appropriate time. Household debt and real estate prices in Seoul and surrounding areas also factored into the decision.