The Bank of Korea's Monetary Policy Committee raised the base interest rate from 2.50% to 2.75% in July, marking the first rate hike in 3 years and 6 months. The decision came as June consumer prices rose 3.2% year-on-year following a 3.1% increase in May, while the USD-KRW exchange rate traded at 1,500 won per dollar and household debt surged amid rising apartment prices and stock market leverage. The move aligns with global monetary tightening, as the European Central Bank raised rates in June and the Bank of Japan increased its base rate in June for the first time in 31 years since 1995, responding to persistent inflation pressures from the Middle East conflict and global supply chain disruptions.
Bank of Korea Raises Base Rate to 2.75% in July
The Bank of Korea's Monetary Policy Committee raised the base interest rate from 2.50% to 2.75% in July. This marked the first rate increase in 3 years and 6 months. Bank of Korea Governor Shin Hyeon-song attended the Monetary Policy Committee meeting on May 28 at the Bank of Korea headquarters in Jung-gu, Seoul.
![Bank of Korea Governor Shin Hyeon-song attends Monetary Policy Committee meeting]()
Bank of Korea Governor Shin Hyeon-song attends the Monetary Policy Committee meeting on May 28 in Seoul
June Consumer Prices Rise 3.2% Year-on-Year
Consumer prices in June rose 3.2% compared to the same month last year. This followed a 3.1% increase in May, marking the second consecutive month of inflation above 3%. International oil prices surged amid the Middle East conflict. The USD-KRW exchange rate traded at 1,500 won per dollar, a level previously seen during the global financial crisis. Apartment prices rose in the Seoul metropolitan area, leading to a surge in household loans and increased debt-financed stock market investments.
Global Central Banks Tighten Monetary Policy in June
The European Central Bank raised its base rate in June ahead of the Bank of Korea's July decision. The Bank of Japan raised its base rate in June for the first time in 31 years since 1995. High oil prices established themselves as the new normal following the war.
![Chart showing South Korea-US base rate trends]()
Chart showing South Korea-US base rate trends as the Monetary Policy Committee raised rates from 2.50% to 2.75% on the 16th
Government Plans 800 Trillion Won Budget Expansion
The government announced plans to increase total expenditure to over 800 trillion won for next year. The government cited semiconductor tax revenue as the basis for the fiscal expansion. This announcement came at the time when the Bank of Korea shifted to monetary tightening.
FAQ
What did the Bank of Korea do with interest rates in July?
The Bank of Korea's Monetary Policy Committee raised the base interest rate from 2.50% to 2.75% in July, marking the first rate hike in 3 years and 6 months.
How high was inflation in June?
June consumer prices rose 3.2% year-on-year, following a 3.1% increase in May, marking the second consecutive month of inflation above 3%.
Which other central banks raised rates in June?
The European Central Bank raised rates in June, and the Bank of Japan increased its base rate in June for the first time in 31 years since 1995.
