South Korea’s central bank raises rate for 1st time in 3-1/2 years

South Korea’s central bank raised its key interest rate Thursday for the first time in three and a half years, citing inflation, stronger economic growth and increasing financial stability risks.

The Bank of Korea (BOK) raised its benchmark policy rate by a quarter percentage point from 2.50% to 2.75% “as widely expected to tackle high inflation amid lingering Middle East uncertainties,” Yonhap News Agency reported.

It marked the first time since January 2023 that the seven-member BOK Monetary Policy Board raised the rate.

“Along with economic growth having strengthened, led by exports and investment, inflation is expected to remain above the target level for a considerable period of time, and financial stability risks also persist," the BOK said in a statement.

It added that all members supported the rate-hike decision.

The central bank last raised its benchmark interest rate by 0.25 percentage points to 3.5% in January 2023.

However, it initiated a monetary easing cycle in October 2024 to support economic growth.