South Korea announces second successive rate hike

South Korea's central bank, the Bank of Korea, raised its interest rates for the second consecutive time on Thursday, marking its first increase in over three years. The bank increased its base rate from 2.75% to 3.0%, indicating its confidence in the economy's continued robust growth. Bank of Korea stated that it was appropriate to raise the rate due to the stronger-than-expected pace of economic growth, supported by strong exports and a recovery in domestic demand.

The bank emphasized the importance of preventing inflationary pressures from becoming widespread through preemptive action.

The inflation rate, stubbornly high, climbed 2.8% on-year in July, slightly lower than June but still well above the bank's two percent target, largely due to the energy cost surge caused by the Middle East crisis. Monetary policymakers also revised their economic growth forecasts for this year to 3.3% and 2.9% for next year, an upward revision from their May forecasts of 2.6% and 2.1% respectively.

The Central Bank cited strong exports and investment, particularly in the semiconductor sector, as key drivers of the domestic economy's robust performance. Samsung Electronics and SK hynix, South Korea's two largest chipmakers, have been instrumental in this growth, with Samsung reporting an operating profit surge of over 1,800% in the second quarter and SK hynix reporting a net profit increase of more than 1,200% in the same period.

The surge in these companies' profits contributed significantly to the South Korean benchmark Kospi index reaching a record high above 9,000 points in June, before a subsequent tech market downturn brought it sharply lower.