South Korea central bank raises benchmark rate to 2.75 percent

South Korea’s central bank raised its benchmark policy rate by a quarter percentage point to 2.75 percent on Thursday, the first increase since January 2023. The move follows a monetary policy meeting and aims to tighten money supply amid consumer price inflation above 3 percent in May and June.

Officials pointed to higher energy costs linked to the U.S. and Israel’s conflict with Iran and a weaker Korean won as contributing factors.

Growth and debt context The government raised its 2026 growth forecast to 3 percent on Tuesday, citing strong semiconductor exports tied to global artificial intelligence spending. Officials had previously held or lowered rates despite concerns over household debt and real estate prices in Seoul and surrounding areas.

Rising real estate prices and a rally in technology stocks have fueled additional borrowing, while the job market remains sluggish in manufacturing, chemicals, and energy sectors affected by Middle East disruptions. Officials stated that inflation is expected to stay above target for a considerable period and that risks to financial stability persist.

They indicated that the timing and pace of any further rate increases would depend on incoming data.