Bank of Korea Gov. Shin Hyun-song bangs the gavel at a monetary policy board meeting Thursday. (Joint Press Corps) The Bank of Korea on Thursday raised its benchmark interest rate for the first time since May 2025, ending a pause in monetary policy that had persisted for more than a year, as mounting inflationary pressures and the prolonged weakness of the won strengthened the case for further monetary tightening.The Monetary Policy Board agreed to raise the benchmark interest rate by 0.25 percentage point, bringing the base rate to 2.75 percent.The decision came as surging global oil prices triggered by the ongoing conflict involving the US, Israel and Iran continued to feed into domestic prices, pushing inflation further above the central bank's target.Consumer prices rose 3.2 percent in June from a year earlier, well above the BOK's 2 percent target. It marked the fastest pace of inflation since December 2023, when consumer prices also rose 3.2 percent.Headline inflation had remained in the 1-2 percent range in January and February before accelerating in March following the outbreak of the Middle East conflict. It exceeded the 3 percent mark in May and remained at that level in June. Prices of everyday necessities, as measured by the living cost index, climbed 3.4 percent in June.The won's prolonged weakness has also reinforced the case for a rate hike. Although the Korean currency has strengthened modestly to around 1,485 won per dollar in recent days, it had traded above the psychologically important 1,500-won threshold for more than a month.Korea's benchmark interest rate is currently up to 1.25 percentage points below the US Federal Reserve's policy rate. The wide interest rate differential has increased demand for dollar-denominated assets, adding downward pressure on the won.With the Federal Reserve widely expected to raise interest rates in the second half of this year, the policy rate gap could widen further unless the BOK moves preemptively. A wider differential would likely intensify downward pressure on the won and increase volatility in the foreign exchange market.