The last time the central bank raised interest rates back-to-back was nearly four years ago
Bank of Korea Governor Shin Hyun-song gavels during a meeting of the central bank’s Monetary Policy Board on Aug. 27, 2026. (courtesy BOK)
The Bank of Korea raised its benchmark interest rate by 25 basis points to 3.00% on Thursday, marking its second consecutive rate hike. The back-to-back increases push Korea’s benchmark rate back into the 3% range for the first time in 18 months, since February last year.Back-to-back rate hikes are highly unusual for the central bank. The last time its Monetary Policy Board raised rates at two consecutive meetings was in October and November 2022, nearly four years ago. This time, the decision was largely driven by economic indicators that came in stronger than expected.Korea’s real gross domestic product (GDP) grew 0.6% in the second quarter from the previous quarter, well above the Bank of Korea’s earlier forecast of 0.2%. Strong exports, particularly those driven by the semiconductor boom, helped support growth and offset some of the economic drag typically associated with higher borrowing costs.Stronger purchasing power also added to inflationary pressures. Real gross domestic income (GDI), which reflects households’ real purchasing power, jumped 3.6% from the previous quarter and 15.6% from a year earlier.Meanwhile, household debt emerged as another major concern, with household credit surpassing 2 quadrillion won (US$1.4 trillion) for the first time as of the end of June. An overheated housing market, particularly in Seoul, also added to pressure on the central bank to keep monetary policy tight.Financial markets expect the rate-hike cycle that began in July to continue for the time being.By Kim Young-bae, senior staff writerPlease direct questions or comments to [english@hani.co.kr]
