South Korea’s central bank delivered its second consecutive rate hike on Thursday, pressing ahead with its campaign to cool inflation that remains stubbornly above target.
The Bank of Korea raised its benchmark rate by 25 basis points to 3%, the highest level since January 2025. The move was in line with market expectations, according to the central bank’s statement.
Core inflation climbs
The decision comes after core inflation — which excludes volatile food and energy prices — rose to 2.6% in July, the highest reading since December 2023. Headline inflation cooled slightly to 2.8% in July, but it has accelerated every month since February, when the Iran war began, through June.
The BOK said inflation is expected to remain above its 2% target “for a considerable time,” citing persistent cost pressures and strong demand.
Housing prices surge
A key driver of the BOK’s hawkish stance has been the rapid acceleration of housing prices in the capital. Seoul home prices jumped 2.5% month on month in June, the sharpest gain in five years, according to South Korean news outlet Asia Business Daily.
The central bank, in its previous policy meeting, said it was necessary to “continue a policy stance consistent with further rate hikes” as elevated cost pressures persist and housing costs in Seoul and surrounding areas continue to rise.
Growth outlook solid
The BOK also sounded a relatively upbeat note on the economy, saying both exports and domestic demand are expected to show strong growth, underpinned by spillover effects from the country’s booming semiconductor sector.
That combination — resilient growth alongside sticky inflation — has left policymakers walking a tightrope as they seek to tame price pressures without derailing momentum in Asia’s fourth-largest economy.
Source: www.cnbc.com — https://www.cnbc.com/2026/08/27/korea-bok-rate-hike-inflation.html
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