[Anchor]

The Bank of Korea has raised the base interest rate for the second consecutive month, following last month's hike. The central bank stated this preemptive action was taken before inflation could surge further and that it would help curb rising housing prices in the capital area. However, individuals and businesses burdened with heavy debt are expected to face a growing financial strain.

Reporter Kim Beom-joo has the details.

[Reporter]

The Monetary Policy Board of the Bank of Korea has raised the base interest rate by 0.25 percentage points to 3.0%.

This marks back-to-back rate hikes for two consecutive months, following last month's increase.

This is the first time in 3 years and 7 months that the Monetary Policy Board has raised the base rate in consecutive meetings.

A major factor behind the decision was the projection that this year's economic growth rate will significantly exceed the original forecast of 2.6% to reach 3.3%, driven by semiconductor exports selling in greater volumes and at higher prices than expected.

The bank expressed concerns that if the revenue earned from semiconductors is fully injected into domestic investment and consumption, it could further stimulate inflation, which is already showing no signs of slowing down.

The Bank of Korea explained that the rate hike was designed as a preemptive measure before such a scenario unfolds.

[Shin Hyun-song / Governor, Bank of Korea: There is an expression that a stitch in time saves nine. It means that delayed responses incur additional costs, and we have decided to implement our policy early to prevent that.]

The bank also added that this hike will help reduce household loans and further contribute to stabilizing housing prices in the greater Seoul metropolitan area.

The BOK stated that it could raise interest rates once more within the next six months, which would mean a total rate increase of 0.75 percentage points over a short period across three adjustments.

The problem lies with businesses and individuals pushed to their limits.

For self-employed individuals who previously paid an annual average of 17 million won in interest per person, the burden will increase by 1.68 million won, while those with mortgage loans will see their average annual interest grow by 880,000 won.

The Bank of Korea suggested that the government should implement measures such as expanding low-income and retail loan support to cushion the shock.

[Shin Hyun-song / Governor, Bank of Korea: There are many concerns regarding vulnerable borrowers due to this rate hike. We always keep that in mind and are in close communication with the government....]

BOK Governor Shin Hyun-song also noted that the won-dollar exchange rate remains high and that a stronger won is necessary to curb inflation, adding that the central bank will play its part.

(Video Editing: Kim Ho-jin, Design: Cho Soo-in)