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FinanceBank of Korea raises rate 25bp to 3%, highest since Jan 2025
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The Bank of Korea raised its benchmark interest rate by 25 basis points to 3%, the highest level since January 2025, in a move widely expected by markets. This marks the second consecutive rate hike as the central bank battles persistent inflationary pressures. Core inflation in Asia's fourth-largest economy climbed to 2.6% in July, the highest since December 2023, while headline inflation cooled slightly to 2.8% but has been rising monthly since February. The BOK noted that elevated cost pressures persist, housing prices in Seoul surged 2.5% month-on-month in June (the fastest in five years), and both export and domestic demand are expected to show strong growth supported by the semiconductor sector. The central bank reiterated that inflation is forecast to remain above its 2% target for a considerable time, signaling further tightening may be needed.
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Pedestrians cross a road in front of the Bank of Korea headquarters in Seoul on July 16, 2026. Jung Yeon-je | AFP | Getty Images
South Korea's central bank raised interest rates for a second consecutive meeting on Thursday, intensifying its efforts to curb rising prices after core inflation hit its highest level since December 2023 last month.
The Bank of Korea (BOK) hiked its benchmark rate by 25 basis points to 3%, the highest level since January 2025. The move was in line with market expectations.
The rate increase follows a rise in core inflation in Asia's fourth-largest economy, which climbed to 2.6% in July. While the headline inflation rate cooled slightly to 2.8% in July, it had been rising every month from February—when the Iran war began—through June.
In its last meeting, the BOK stated that it was necessary to "continue a policy stance consistent with further rate hikes," citing persistent cost pressures and accelerating housing prices in Seoul and its surrounding areas.
According to South Korean news outlet Asia Business Daily, housing prices in Seoul jumped 2.5% month-on-month in June, marking the highest monthly increase in five years.
The BOK also noted that both exports and domestic demand are expected to show strong growth, supported by spillover effects from the country's semiconductor sector.
As a result, the central bank forecast that inflation would remain above its 2% target level for a considerable time.
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Bank of Korea Raises Key Rate to 3% Amid Persistent Inflation