Bank of Korea Raises Benchmark Interest Rate by 0.25 Percentage Points

The Bank of Korea’s Monetary Policy Board raised the base interest rate by 0.25 percentage points, from 2.50% per year to 2.75%, on the 16th. This is the first increase in the base rate in 3 years and 6 months since January 2023. After cutting rates in May last year, the board had kept them unchanged for eight consecutive meetings through this May, but this time it changed course, reflecting signs of economic recovery and inflation concerns. All seven committee members unanimously agreed to the hike. The Bank of Korea said that growth is strengthening, led by exports and investment, but that inflation could remain above the target level for the time being. The gap in the base rate with the United States has narrowed from 1.25 percentage points at the upper end to 1 percentage point. The Bank of Korea also said it is keeping open the possibility of additional rate hikes in the future.