Given the rising inflation and accelerating economy, the Bank of Korea believes it is necessary to raise interest rates.

The Bank of Korea reiterated that policy rates need to be raised at the appropriate time. This further reinforces its hawkish stance, as policymakers will meet in a week to decide whether to resume tightening policies. A report submitted to the parliament on Thursday showed that the Bank of Korea stated this shift reflects stronger economic growth, inflation above target levels, and increasing financial stability risks, which are increasingly unfavorable for maintaining unchanged borrowing costs. The report echoes the central bank's hawkish shift since May, when it raised its 2026 economic growth forecast to 2.6% and suggested that inflation, growth, exchange rates, and financial imbalances are increasingly pointing in the same policy direction. It is widely expected in the market that the Bank of Korea will raise the benchmark interest rate to 2.75% at the meeting on July 16th.