Seoul: South Korea's central bank has raised its benchmark interest rate by 25 basis points to 2.75 percent, a move aimed at addressing high inflation concerns amid ongoing uncertainties in the Middle East.

According to Yonhap News Agency, the Bank of Korea (BOK) convened a Monetary Policy Board meeting where it decided to lift the benchmark rate from the previous 2.5 percent. This rate hike marks the first increase since January 2023, when the BOK had raised the rate by a quarter-percentage point to 3.5 percent as part of efforts to normalize policy and boost an economy affected by the pandemic.

The BOK had initially begun monetary easing in October 2024, reducing the benchmark interest rate by a total of 100 basis points from 3.5 percent to support economic growth. The rate had remained unchanged since July 2025, as the central bank maintained its stance to encourage economic stability.

The recent rate hike was anticipated after the BOK signaled a shift towards a more hawkish approach in recent weeks to combat rising inflationary pressures. During its previous rate-setting meeting in May, the central bank had left the benchmark rate unchanged for the eighth consecutive time, indicating a careful approach to monetary policy adjustments.