Bank of Korea (BOK) delivers second straight rate hike, lifts benchmark to 3.00%
The move lands in line with market pricing, with 18 of 35 economists surveyed by Reuters having called for the hike, limiting the scope for a sharp won or bond market reaction on the decision itself. Attention now shifts to Governor Shin Hyun Song’s press conference, where any signal on the pace of further tightening will likely carry more weight than the widely anticipated move. The unchanged 2026 inflation forecast at 2.7% suggests the board sees current price pressures as persistent rather than accelerating, which could temper expectations for a third consecutive hike in the near term. Traders will also weigh the growth forecasts, with 2026 GDP seen at a solid 3.3% before slowing to 2.9% in 2027, against the BOK’s stated concern over financial stability risks.
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Background:
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The Bank of Korea followed through on a widely expected second straight hike, taking its policy rate to 3.00%.
Summary:
- BOK raised its seven-day repurchase rate by 25 basis points to 3.00% on Thursday, a second consecutive increase.
- The move was expected, with 18 of 35 economists in a Reuters poll forecasting the hike.
- The seven-member monetary policy board cited inflation staying above target and ongoing financial stability risks as drivers.
- BOK forecasts 2026 inflation at 2.7%, unchanged from its previous projection, with 2027 inflation seen easing to 2.3%.
- The bank sees 2026 GDP growth at 3.3%, slowing to 2.9% in 2027.
- Governor Shin Hyun Song is due to hold a press conference at 0210 GMT.
The Bank of Korea raised its benchmark interest rate by a quarter percentage point to 3.00% on Thursday, delivering a second consecutive increase as inflation remains above target and financial stability risks continue to weigh on the policy outlook.
The seven member monetary policy board voted to lift the seven day repurchase rate by 25 basis points, a decision that matched market expectations. A Reuters poll of 35 economists found 18 had forecast the hike, underscoring how widely anticipated Thursday’s move had become heading into the decision.
Alongside the rate announcement, the BOK updated its economic projections. The bank sees inflation running at 2.7% in 2026, unchanged from its previous forecast, before easing to 2.3% in 2027. On growth, the BOK projects GDP expanding 3.3% in 2026, slowing to 2.9% the following year. The steady inflation forecast suggests policymakers view current price pressures as persistent rather than intensifying, even as they opted to tighten policy further.
Governor Shin Hyun Song is scheduled to hold a press conference at 0210 GMT following the decision, where he is expected to face questions on the outlook for further tightening and how the board is balancing inflation control against the financial stability concerns it has flagged. With back to back hikes now delivered, markets will be looking for clarity on whether the BOK intends to pause and assess the impact of tighter policy, or whether further increases remain on the table given inflation’s persistence above target.
The decision keeps South Korea moving in a tightening direction at a time when several other major central banks, including the Bank of Japan, are also weighing the timing of their next policy moves, adding to a broader narrative of central banks recalibrating policy in response to sticky inflation dynamics across the region.
This article was written by Eamonn Sheridan at investinglive.com.