South Korea’s central bank is done waiting. The Bank of Korea is set to raise its benchmark interest rate on July 16 for the first time since January 2023, ending a multi-year stretch of policy stability as inflation refuses to cooperate.
The expected move: a 25 basis point increase, lifting the seven-day repurchase rate from 2.50% to 2.75%. Markets have largely made up their minds already, pricing in roughly an 89% probability of the hike heading into the Monetary Policy Committee meeting.
Why now
The short answer is inflation. South Korea’s consumer price growth hit 3.1% in May 2026, a meaningful distance above the BOK’s 2% target.
Two forces are driving that number. Global oil prices have climbed on the back of ongoing Middle East tensions, feeding through to energy costs across the economy. Meanwhile, South Korea’s export sector has held up well, supporting domestic demand and keeping price pressures alive.
