Bank of Korea lifts base rate 25 bps to 2.75%; inflation holds at 3.2%

A 2.75% base rate and a 25 basis-point hike made the Bank of Korea the main market event for Korean assets on July 16. In its monetary-policy statement, the Monetary Policy Board said it would operate policy with the base rate lifted from 2.50% to 2.75% until the next decision. The market significance is not only that this was the first hike since 2023, but that the BoK tied it to both inflation and financial-stability risks.

The statement said exports and investment were strengthening around semiconductors while consumption remained solid. The bank said 2026 growth is likely to exceed its May forecast of 2.6% by a large margin. June consumer-price inflation was 3.2%, core inflation excluding food and energy was 2.5%, and short-term household inflation expectations stayed in the high-2% range. Those numbers gave the board room to tighten even as global markets continued to price Middle East energy risk and U.S. policy uncertainty.

The local market reaction was immediate. Korean market reports showed the KOSPI down more than 6% on the day, with chip shares bearing the largest index weight, while dollar-won trading tested the 1,480 level. The rate move had been discussed by economists before the decision, but the statement kept the door open to additional tightening if inflation and household-debt risks remain elevated.

The next data checks are second-quarter GDP, July CPI and the minutes of the policy meeting. If growth moves closer to 3% and core inflation remains near 2.5%, investors will have to decide whether 2.75% is the terminal rate or a waypoint toward 3.00%.

Not investment advice. Verify all figures with primary sources before acting.