FX.co ★ Bank of Korea Delivers Second Straight Rate Hike

The Bank of Korea (BoK) raised its base rate by 25 basis points to 3% at its August 2026 meeting, in line with market expectations. This marked a second consecutive hike and the first back-to-back increases since early 2023. The decision reflected persistent inflation risks, as stronger-than-expected economic growth and an unprecedented semiconductor boom—driven by global AI demand—bolstered the export-oriented economy. In the second quarter, gross domestic income surged 15.6% year-on-year, the fastest pace in more than 38 years, underscoring the strength of the current expansion. In response, the BoK upgraded its 2026 growth forecast to 3.3% from 2.6% and projected 2.9% growth in 2027. Inflation, however, continued to exceed the central bank’s 2% target, with consumer prices rising 2.8% in July and core inflation at 2.6%. The recent appreciation of the won also eased concerns about tightening policy too quickly, allowing policymakers to focus on containing persistent price pressures amid solid economic momentum.