Seoul: The Bank of Korea (BOK) on Thursday delivered its first back-to-back rate hike in three years and seven months, signaling its determination to curb mounting inflationary pressure, rising housing prices, and a weak Korean won.

According to Yonhap News Agency, the BOK Monetary Policy Board raised the benchmark rate by 0.25 percentage point to 3 percent, following a 0.25 percentage point increase at its previous meeting in July. Gov. Shin Hyun-song described the rate hike as a "preemptive, proactive and advanced" response to bring inflation and other financial risks under control, while Asia's fourth-largest economy maintains solid growth driven by strong semiconductor exports.

"Most studies show that a proactive policy response can stabilize inflation expectations more quickly than a belated one, thereby reducing the intensity and duration of monetary tightening and ultimately easing the burden on growth," Shin told reporters during a press conference. He emphasized the importance of timely action, citing the proverb "To block something with a shovel that could have been blocked with a hand hoe," a Korean equivalent of "A stitch in time saves nine."

Consumer prices in the country rose 2.8 percent in July from a year earlier, remaining above the BOK's 2 percent target despite falling below the 3 percent mark for the first time in three months. Core inflation, which excludes volatile food and energy prices, advanced 2.6 percent from a year earlier in July, marking the sharpest increase since December 2023.

Housing prices have continued to rise steadily, particularly in the greater Seoul area, despite government efforts to tighten lending rules, raising concerns over household debt. Although the won rose to around the 1,380-won level against the U.S. dollar this week, it had hovered around 1,550 won in June as foreign investors sold off local stocks amid a strong U.S. dollar.

Shin acknowledged that the BOK's rate hike at two consecutive meetings is "unprecedented," stating that the action will also help stabilize inflation, housing prices, and the foreign exchange market. "This preemptive measure will help mitigate the recent upward trend in housing prices in the Seoul metropolitan area and the rise in household debt," he said. "I believe that an early response through monetary policy will help stabilize the foreign exchange market."

Despite these measures, the BOK chief remained cautious about another rate hike in the near future. Citing the board's forward guidance chart, Shin expects the rate to rise gradually over the next six months. The dot plot showed varying expectations, with 10 dots at 3.25 percent, six at 3.5 percent, and five at 3 percent for the next six months. "This can be interpreted as meaning that the board would raise the rate once in the upcoming four meetings," Shin explained, emphasizing the need for gradual moves to review the impact of the consecutive rate hikes.