BOK Joins Global Hike Parade at 2.75%, Won Slumps to a 17-Year Nap 💸

The Bank of Korea raised its benchmark interest rate by 25 basis points to 2.75% on Thursday, its first increase since January 2023, as headline inflation climbed to 3.2% in June, the highest since 2023. The decision matched the forecast in a Reuters poll of economists and followed signals from Governor Shin Hyun Song, who took office in April, that higher rates were on the table. The central bank noted that large IT-sector performance bonuses could feed broader wage gains, adding pressure on prices. The Korean won has weakened 2.93% against the dollar this year, sliding to 1,561.5 on June 5, its weakest level in 17 years.

South Korea's economy has nonetheless expanded at its fastest quarterly pace in more than five years, with gross domestic product growing 1.8% in the first quarter. The government lifted its 2026 forecast to 3.0%, a five-year high, citing demand for AI infrastructure. The Bank of Korea's move is not isolated. The European Central Bank lifted rates to 2.25% in June, while the Bank of Japan raised its rate to 1.00%, its highest since 1995. A Middle East oil shock has revived inflation across major economies, according to reporting on the policy shift.

South Korean equities reacted sharply on Thursday. The KOSPI fell nearly 6.0% to 6,852, extending monthly losses. AI chipmaker SK Hynix dropped 11.05% to 1,852,000 won after a 15% decline earlier in the week, while Samsung Electronics fell more than 3%. Both stocks led steep losses as the benchmark index swung violently. The KOSPI had already seen sharp swings this year amid volatile sentiment around AI and semiconductor names.

The rate decision carries implications for digital assets as well. South Korea remains among the most active digital-asset markets, with heavy retail participation through exchanges such as Upbit. Most economists expect one further hike to 3.00% by year-end, leaving the path for capital flows between stocks and cryptocurrencies an open question for the months ahead.