Bank of Korea Governor Shin Hyun-song says the pre-emptive moves aim to help ‘reduce the costs to the economy’
4-MIN READ4-MIN ListenPark Chan-kyongPublished: 7:35pm, 27 Aug 2026South Korea’s central bank has raised interest rates for a second straight month, with analysts saying its semiconductor boom has given policymakers room to confront inflation, a weak won and rising home prices, but at the cost of a deeper squeeze on indebted households and small businesses.The Bank of Korea (BOK) lifted its benchmark rate by 0.25 percentage point to 3.0 per cent on Thursday, a month after an identical increase took it to 2.75 per cent in July.
The latest move brought the rate to its highest level since February 2025 and signalled a central bank willing to accept some damage to domestic demand to contain broader financial risks.
Households with housing-related loans, small businesses and other borrowers are expected to feel the pressure most acutely. But with semiconductor exports and investment driving stronger-than-expected growth, economists said the BOK had decided the greater danger lay in moving too slowly.
The Monetary Policy Board made that priority clear in its statement, saying: “It is important to prevent inflationary pressures from becoming widespread through pre-emptive action, and it is also necessary to continue paying attention to financial stability risks.
“The board will decide the timing and pace of further increases in the Base Rate while assessing trends in inflation and the domestic economy, as well as financial stability.”
