South Korea’s central bank on Thursday raised its benchmark interest rate by 25 basis points, marking its first rate hike in more than three years.
The Bank of Korea (BOK) announced the decision after a meeting of its Monetary Policy Board, increasing the benchmark rate from 2.5 percent to 2.75 percent.
Since May, the BOK has signalled a shift toward tighter monetary policy, citing persistent inflationary pressures, a weaker won and resilient economic growth driven by the country’s strong semiconductor exports.
The case for higher interest rates has also been reinforced by rising house prices and elevated household debt.
South Korea’s economy expanded at its fastest pace in nearly six years during the first quarter, while BOK Governor Shin Hyun-song has warned that inflation is likely to remain above the central bank’s target for an extended period.
Consumer prices rose 3.2 percent year-on-year in June, driven in part by higher energy costs and supply chain disruptions linked to the conflict in the Middle East.
Thursday’s move marks the central bank’s first interest rate increase in more than three years, signalling policymakers’ determination to contain inflation while maintaining financial stability.
AFP
