BOK raises rates for 1st time in more than 3 years

The Bank of Korea (BOK) raised its benchmark interest rate, Thursday, for the first time in more than three years, as persistent inflation and improving economic growth led by the semiconductor industry bolstered the case for a tighter monetary policy.

The central bank lifted its policy rate by 25 basis points to 2.75 percent at its Monetary Policy Board meeting, marking its first increase since January 2023.

The semiconductor-driven boom has strengthened the economic outlook while increasing concerns that excess liquidity could fuel asset prices and inflation.

In June, consumer prices accelerated to 3.2 percent, extending a run above the central bank’s 2 percent target since the U.S.-Israel conflict with Iran erupted in late February.

Together with improving growth prospects, the sustained price pressures strengthened the case for the BOK to begin its tightening cycle.

Markets are expecting another 0.25-point rate increase as early as August or October.