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Bank of Korea Signals Further Rate Hikes After July Increase

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The Bank of Korea board members hinted further rate hikes will be needed to bring inflation back to target, after it raised its base rate by 25 basis points to 2.75% at its July meeting.

Members noted consumer inflation exceeded 3% for two straight months, while core inflation is expected to accelerate on strengthening demand-side pressure amid economic recovery.

The Korean economy continues to benefit from robust semiconductor exports and AI-driven growth, with members projecting growth to significantly exceed previous forecasts, according to the July minutes of the meeting.

However, financial stability concerns have intensified, including rising housing prices in the capital region, growing household debt, and elevated volatility in stock prices.

Meanwhile, the won-dollar exchange rate remained weak despite a substantial current account surplus.

External uncertainties persist, with geopolitical tensions in the Middle East and fluctuating oil prices, resulting in changing expectations of monetary policy among major economies.

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