Bank of Korea Raises Interest Rates Again Amid Rising Core Inflation
The Bank of Korea (BOK) increased its benchmark interest rate by 25 basis points to 3% on August 26, marking the second consecutive hike. The decision was driven by persistent core inflation, which reached 2.6% in July—the highest since December 2023—despite overall consumer price inflation easing slightly. The central bank cited three main factors for its policy shift: sustained inflationary pressure, strong economic growth fueled by the AI and semiconductor sectors, and financial stability concerns linked to rising housing prices in Seoul. The BOK had previously paused rate hikes after cutting rates earlier this year but resumed tightening last month with a 25-basis-point increase. The move signals continued monetary tightening as policymakers assess inflation trends and economic conditions. Markets have already shown signs of stress, including a sharp decline in the KOSPI index and outflows from leveraged chip funds.
