The Monetary Policy Board of the Bank of Korea (BOK) raised the Base Rate by 25 basis points to 3.00% in August, citing stronger-than-expected growth, inflation expected to remain above target for a considerable time and continuing financial stability risks. The rate had been held at 2.50% from August 2025 through May 2026 before a 25-basis-point increase to 2.75% in July. The BOK left the rate on programs under the Bank Intermediated Lending Support Facility unchanged at 1.25%. Consumer price inflation eased to 2.8% in July while core inflation rose, and the BOK projected robust growth of 3.3% this year and 2.9% next year, supported by semiconductor-led exports and investment and a strengthening consumption recovery. Household loans increased substantially while housing prices in Seoul and surrounding areas continued to rise rapidly. The Korean won strengthened significantly against the US dollar as foreign exchange supply-demand conditions improved and the dollar weakened. Globally, robust artificial intelligence investment is supporting moderate growth, while higher energy prices and Middle East tensions are expected to keep inflation elevated. The Board will determine the timing and pace of further Base Rate increases based on inflation, domestic growth and financial stability developments.
2026-08-27Bank of Korea
Bank of Korea Raises Base Rate by 25 Basis Points to 3.00%
The Bank of Korea raised the Base Rate by 25 basis points to 3.00%, citing stronger-than-expected growth, persistent above-target inflation and financial stability risks. Further increases will depend on inflation, growth and financial stability developments, while the Bank Intermediated Lending Support Facility rate remains at 1.25%.