Bank of Korea raises interest rates for first time since 2023
In response to the inflationary pressure caused by the conflict between the United States and Iran, the Bank of Korea raised its benchmark interest rate for the first time in three and a half years, joining the global tightening of monetary policy. The Bank of Korea raised its benchmark seven-day repo rate by 0.25 percentage points to 2.75% on Thursday. The last time the bank raised interest rates was in January 2023. The central bank has kept interest rates at 2.50% since May 2025. At that time, the bank made its final rate cut and paused the easing cycle that began in October 2024. All 25 economists surveyed by the media had expected the Bank of Korea to raise interest rates in July, marking a shift to tighter monetary policy. This shift towards tightening was within the general expectations of the market. Since the last meeting in May, Bank of Korea Governor Shin Hyun-song has made several comments hinting at a tightening trend, and the current inflation rate is still well above the central bank's 2% target. Stronger-than-expected economic growth also provides room for the central bank to tighten policy. As the global artificial intelligence construction boom continues to drive chip demand, South Korea's exports in June increased by 70.7% compared with the same period last year, recording the strongest growth in the past 50 years. Earlier this week, the South Korean government raised its economic growth forecast for this year. Inflation expectations, citing strong chip exports and fiscal stimulus.