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Bank of Korea lifts base rate to 2.75% in hawkish shift

DBS now expects the policy rate to reach 3.25% by year end 2026 after the BoK raised rates and flagged further hikes.

Reported · Written up by our desk · Central Banks

DBS Group Research said the Bank of Korea raised its base rate to 2.75% from 2.50% at its July 16 meeting, marking the first rate hike since January 2023. The bank kept a hawkish stance, indicating additional rate increases are likely, while providing no specific timing for future moves, according to FXStreet.

DBS described the decision as a shift toward a faster tightening path. The economist now forecasts the policy rate will rise to 3.25% by year end 2026, after previously expecting a total of 50 basis points of hikes in the second half of 2026, spread across third and fourth quarters.

FXStreet also noted that DBS expects growth to benefit from the AI-driven semiconductor sector, while projecting that CPI inflation will overshoot the target. The research cited hawkish messaging as support for a quicker rate hike cycle than DBS had anticipated earlier.

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