Bank of Korea Lifts Rate to 2.75% in First Hike Since 2023

The Bank of Korea has raised its benchmark interest rate for the first time in three and a half years, lifting the base rate by 0.25 percentage points to 2.75% at its 16 July Monetary Policy Board meeting. The decision was unanimous and ended 14 consecutive months without a change, effectively reversing the easing cycle that began in October 2024 and marking the first increase since January 2023. Governor Shin Hyun-song said the bank would keep responding until confident inflation was moving sustainably toward target, while declining to commit to a timetable for further moves. Policymakers pointed to a cluster of pressures: consumer inflation near 3%, sharp increases in import and producer prices, rising home prices in the Seoul metropolitan area, accelerating household debt growth and volatility in the won. The board noted that large bonuses at semiconductor firms have been flowing into the property market. Commercial lenders had already begun tightening ahead of the decision, with NH NongHyup Bank raising both fixed and variable mortgage rates by 0.2 percentage points in June and Woori Bank withdrawing a preferential discount on a five-year fixed-rate mortgage product. The bank estimates a cumulative 0.50-point rise in lending rates would add about 3.7 trillion won to borrowers' annual mortgage interest costs.