The Bank of Korea raised its benchmark interest rate for a second consecutive meeting, intensifying efforts to contain inflation pressures as an unprecedented semiconductor boom fuels stronger-than-expected economic growth. On Thursday, the central bank lifted the seven-day repurchase rate by 25 basis points to 3%, a move anticipated by 14 of the 22 economists surveyed by Bloomberg. This follows a similar 25-basis-point hike in July, which marked the first increase since January 2023.
The decision comes as the export-driven economy benefits from exceptionally robust semiconductor demand tied to the global artificial intelligence buildout. Beyond tightening monetary policy, the central bank also sharply upgraded its economic growth projections for this year and next. The bank now sees GDP expanding 3.3% in 2026, up from the 2.6% forecast made in May, while the 2027 growth outlook was raised to 2.9% from 2.1%. Inflation expectations for both years were left unchanged at 2.7% and 2.3%, respectively.
With the latest hike, the policy rate has now risen by a cumulative 50 basis points since the tightening cycle resumed in July. The bank's dual focus on curbing price pressures while acknowledging the strength of the semiconductor-led expansion underscores the delicate balance it faces in navigating the current economic landscape.
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