Bank of Korea Doubles Down With Back-to-Back Hikes as Core Inflation Bites

The Bank of Korea raised its interest rate by 25 basis points to 3% on Thursday. The move marked a second consecutive increase.

Policymakers had already flagged more tightening in July. Firm core inflation and a renewed jump in Seoul housing prices strengthened the case for another move.

Bank of Korea Hikes Rates to 3%

The hike came as consumer price inflation eased to 2.8% in July. However, core inflation, which strips out volatile food and energy prices, moved the other way. It came in at 2.6% in July, the highest since December 2023.

Korea's policy turn is recent. The central bank cut its benchmark rate by a full percentage point between October 2024 and May 2025. It then left the rate at 2.5%.

That pause ended last month. The BOK lifted the rate to 2.75% in July, its first increase in three and a half years.

Thursday's move returns borrowing costs to where they stood before the BOK's February 2025 cut. It also settles a close call among forecasters. 18 of 35 economists surveyed by Reuters expected the hike.

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