Bank of Korea Raises Interest Rate to 3 Percent

The Bank of Korea raised its benchmark seven-day repurchase rate by a quarter point to 3 percent on Thursday, August 28, 2026. This action marks the second consecutive rate hike since July, aimed at curbing inflation risks and containing financial imbalances. The decision follows a period where inflation remained at or above the 2 percent stability target for nearly a year, with core inflation reaching 2.6 percent in July.

The rate increase coincides with a substantial upward revision of economic forecasts. The central bank now projects a 3.3 percent GDP increase for 2026 and 2.9 percent for 2027, driven by an unprecedented semiconductor boom, robust exports, and domestic demand. Second-quarter economic expansion reached 0.6 percent, tripling the bank's previous projections.

Governor Shin Hyun Song had previously emphasized the necessity of a tightening bias to address risks to financial stability, including high household borrowing and rising apartment prices in the Greater Seoul area. Following the announcement, the South Korean won strengthened to 1377.40 per dollar. Shin indicated that several upcoming policy meetings would remain "live" as the bank monitors economic stability.