The Bank of Korea raised its benchmark interest rate by 25 basis points to 3.00% on Thursday, delivering a second consecutive increase as inflation remains above the bank's 2% target and financial stability risks continue to weigh on the policy outlook.

The seven-member monetary policy board voted to lift the seven-day repurchase rate — the short-term rate at which the central bank lends to financial institutions and the anchor for borrowing costs across the economy — in line with market expectations. A Reuters poll of 35 economists found that 18 had forecast the hike, underscoring how widely anticipated Thursday's decision had become heading into the announcement.

The move landed in line with market pricing, limiting the scope for a sharp reaction in the won or bond market. Attention now turns to Governor Shin Hyun Song's press conference at 0210 GMT, where any signal on the pace of further tightening is likely to matter more than the widely expected rate move itself.

Alongside the rate announcement, the BOK updated its economic projections. The bank left its 2026 inflation forecast unchanged at 2.7%, indicating policymakers see current price pressures as persistent rather than accelerating, and still above target through next year. Inflation is then seen easing to 2.3% in 2027.

On growth, the BOK projects GDP expanding 3.3% in 2026 before slowing to 2.9% in 2027. Traders will weigh those forecasts against the central bank's stated concern over financial stability risks as they look for clues on whether the BOK plans to pause and assess the effect of tighter policy, or whether another hike remains possible. That concern has long roots in the structure of the Korean economy: household debt in South Korea runs among the heaviest in the world relative to GDP, which makes the cost of servicing mortgages and other loans a key channel through which rate decisions reach ordinary borrowers and the housing market.

The steady inflation outlook may temper expectations for a third consecutive increase in the near term. With back-to-back hikes now delivered, the press conference is expected to draw close scrutiny for any guidance on how policymakers are balancing inflation control with financial stability concerns.

The decision keeps South Korea on a tightening path at a time when several other major central banks, including the Bank of Japan, are also weighing their next policy moves, adding to a broader pattern of recalibration in response to sticky inflation dynamics across the region.