BOK delivers back-to-back rate hikes, remains hawkish

The Bank of Korea (BOK) increased its benchmark interest rate by a quarter percentage point to 3.00% on Thursday, delivering a second consecutive hike as inflation remains above target and financial stability risks persist. Governor Shin Hyun Song stated that the bank would carefully evaluate the impacts of the back-to-back rate hikes before considering further increases.

The seven-member monetary policy board voted to raise the seven-day repurchase rate to the highest level since February 2025. The BOK also raised its growth estimate for the year to 3.3% from 2.6% projected in July, while leaving its inflation forecast unchanged at 2.7%. Shin emphasized that the rate hikes are necessary to minimize the costs of managing financial stability and forex market predictability, and signaled that additional tightening may continue.

Analysts expect one more rate hike in the first quarter of 2027 before rates hold steady through the end of the year. The market reacted positively to the decision, with policy-sensitive treasury bond futures rising as investors brace for a more drawn-out tightening campaign.