Financial News: Bank Of Korea Hikes Key Rate For Second

Bank Of Korea Hikes Key Rate For Second Straight Time

(RTTNews) - The Bank of Korea raised its benchmark rate by a quarter-point for the second straight meeting on Thursday, to prevent broadening of inflationary pressures.

The Monetary Policy Board of the Bank of Korea voted 6-1 to raise the base rate by 25 basis points to 3.00 percent.

The bank had lifted the rate by a quarter-point at the previous meeting in July.

Policymakers observed that it is necessary to take preemptive action to prevent inflationary pressures from becoming widespread as inflation is set to remain above the target level for a considerable time.

Although headline inflation fell to 2.8 percent in July, core inflation accelerated to 2.6 percent.

Inflation is expected to remain above the target level as the pass-through of elevated cost pressures persists and as demand-side pressures also gradually increase with improving income conditions.

Consumer price inflation is projected at 2.7 percent for this year and 2.3 percent in 2027, both consistent with the May projections. Meanwhile, core inflation outlook for this year was revised up to 2.5 percent from 2.4 percent and that for next year was lifted to 2.5 percent from 2.3 percent.

The bank upgraded its economic growth outlook citing increases in exports and investment on the back of a strong semiconductor sector and the recovery in consumption.

The economy is forecast to grow 3.3 percent in 2026, faster than the May forecast of 2.6 percent and the projection for 2027 was lifted to 2.9 percent from 2.1 percent.

Further, the board noted that volatility in major price variables remained high in financial and foreign exchange markets.

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