Bank of Korea lifts rate to 2.75% amid inflation, won slump

South Korea’s central bank raised its benchmark policy rate by 25 basis points to 2.75%, the first increase since January 2023 and the first tightening in three and a half years. The move was taken to curb consumer‑price inflation that rose to about 3.2% in June, well above the BOK’s 2% target, and to support a won that had weakened to around 1,560 per U.S. dollar.

The decision was widely anticipated – “All but one of 37 economists surveyed in a Reuters poll predicted the hike” – and aligns the BOK with other regional central banks that are tightening. The board noted persistent price pressure from higher energy costs linked to the U.S.–Iran conflict and rising household debt.

Market reaction was sharp: the Korea Composite Stock Price Index (Kospi) fell more than 6%, led by semiconductor giants Samsung Electronics and SK Hynix, while other Asian markets also posted losses. Analysts expect at least one more hike this year, possibly taking the policy rate to 3%.