Bank of Korea raises rates to 2.75% in first hike in over three years
South Korea's central bank hiked its benchmark policy rate on Thursday, raising them for the first time since January 2023 as inflation in the country...
Key points
- South Korea's central bank hiked its benchmark policy rate on Thursday, raising them for the first time since January 2023 as inflation in the country creeps up.
- The hike comes amid rising consumer prices, with headline inflation in June rising to its highest since 2023 at 3.2%.
- The BOK last month said that the payment of large performance bonuses recently seen at some major companies in the IT sector could spread into broader wage increases, translating to upward pressure on inflation.
- The won has strengthened this month and was last trading at 1,484.86 against the dollar.
What happened
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South Korea's central bank hiked its benchmark policy rate on Thursday, raising them for the first time since January 2023 as inflation in the country creeps up. The hike comes amid rising consumer prices, with headline inflation in June rising to its highest since 2023 at 3.2%. The BOK last month said that the payment of large performance bonuses recently seen at some major companies in the IT sector could spread into broader wage increases, translating to upward pressure on inflation. The won has strengthened this month and was last trading at 1,484.86 against the dollar. Providing room for a tighter monetary policy, South Korea's economy expanded by 3.8% in the first quarter, its strongest growth since the fourth quarter of 2021. The rate hike, however, comes amid a tumultuous time in South Korea's markets, as swings in semiconductor stocks Samsung Electronics and SK Hynix, have led to heightened volatility in the benchmark Kospi index.