The Bank of Korea raised its benchmark interest rate by 25 basis points to 3.0% on Thursday, matching market expectations after officials signaled a hawkish stance over the prior month.
The decision follows robust second-quarter growth of 3.7%, driven largely by surging semiconductor exports amid an artificial intelligence-driven global tech cycle. Rising energy prices linked to the Middle East conflict have also contributed to inflationary pressures, though policymakers emphasized demand-side price pressures over supply shocks.
Domestic demand and private consumption remain subdued, raising concerns among analysts about the sustainability of the current growth trajectory. Capital Economics noted that while the economy can absorb the latest increase, the case for further tightening has weakened. The firm projects only one additional 25 bps hike by 2027, suggesting a more cautious path ahead.
The new policy rate of 3.0% is the highest since early 2025, reflecting the central bank’s efforts to balance growth with inflation risks amid volatile global energy markets.
