Bank of Korea Raises Base Rate for Second Consecutive Time to 3%... Growth Forecast Upgraded to 3.3%

[Anchor]

The Bank of Korea has decided to raise the base rate by 0.25 percentage points to 3 percent per annum. It has also revised upward this year's economic growth rate projection to 3.3 percent.

Reporter Hong Yeongjae has the details.

[Reporter]

The Monetary Policy Board of the Bank of Korea raised the base rate by 0.25 percentage points from 2.75 percent to 3 percent today (the 27th).

The base rate was also hiked by 0.25 percentage points last month. This marks the fourth time in history that the Monetary Policy Board has implemented consecutive rate hikes, and the first time in 3 years and 7 months since the streak of rate hikes that began in April 2022.

Previously, the Monetary Policy Board focused on stimulating the economy by cutting the base rate by a total of 1 percentage point across four instances in October and November 2024, as well as February and May of last year.

At the time, monetary easing was inevitable due to a succession of adverse factors, including the emergency martial law, a slump in the domestic construction sector, and the shock from U.S. reciprocal tariffs.

Afterward, as household debt continued to grow and the won-dollar exchange rate rose, the base rate was frozen for eight consecutive times.

However, with semiconductor exports remaining robust and the fallout from the situation in the Middle East causing inflation this year to significantly exceed the Bank of Korea's target level, the central bank took preemptive action by raising rates for two consecutive months, following the hike last July.

Reflecting this trend, the Bank of Korea revised its economic growth rate forecast for this year upward from the previous 2.6 percent to 3.3 percent, a 0.7 percentage point increase.

Forecasting that strong growth momentum will continue for a considerable period, driven by semiconductor exports, it also raised next year's growth forecast from 2.1 percent to 2.9 percent.

With this base rate hike, the policy rate gap with the United States narrowed from 1 percentage point to 0.75 percentage points.

The policy rate gap between South Korea and the U.S. has narrowed to its smallest margin in 3 years and 8 months.

Noting the need to pay close attention to rising housing prices in the greater Seoul area and the expansion of household loans, the Monetary Policy Board did not rule out the possibility of additional rate hikes going forward.

(Video Editing: Kim Ho-jin)
※ Please note: This article was translated by AI and may contain errors.