BOK raises key rate for 2nd consecutive session to 3 pct

Seoul, August 27 - The Bank of Korea (BOK) increased the benchmark rate by 0.25 percentage points for the second consecutive meeting on Thursday, aiming to combat growing inflation. The Monetary Policy Board lifted the key rate to 3 percent, the highest level since January 2025. This action represented the central bank's first rate hike in 3.5 years, and the first back-to-back increases since January 2023, following a series of seven consecutive hikes starting in April 2022.

The central bank has shown a firm commitment to maintaining a cautious stance due to escalating inflationary pressures caused by higher oil prices, geopolitical tensions in the Middle East, and stronger-than-anticipated economic recovery. Recent statistics revealed that consumer prices in the country rose 2.8 percent in July compared to a year ago, dropping below the 3 percent threshold for the first time in three months, yet still significantly above the BOK's 2 percent objective.

Notably, core inflation, which excludes fluctuating food and energy prices, jumped 2.6 percent from a year earlier in July, marking the largest increase since December 2023, when it grew by 2.8 percent.

Furthermore, international crude oil prices remained high due to heightened military tensions between the United States and Iran. Meanwhile, the South Korean economy is projected to achieve annual growth of 3 percent or more in 2026 for the first time in five years. The government had previously forecasted that the national economy would expand by 3 percent in 2026.

In response, the BOK also adjusted its growth forecast for 2026 to 3.3 percent, up from 2.6 percent in its economic outlook report, with a projection of 2.9 percent for 2027.