The move narrowed the interest-rate gap with the United States to 50 to 75 basis points, with the Federal Reserve's target range at 3.50 percent to 3.75 percent, reducing one source of pressure on the won and capital flows.
The BOK said stronger-than-expected growth, persistent inflation pressure and financial-stability risks warranted further tightening despite the stronger won.
The decision defied bond-market expectations for a pause in August and quickly rippled through Korean financial markets.
South Korea's benchmark rate had remained at 2.50 percent from May last year until the BOK raised it by 25 basis points to 2.75 percent in July, its first increase since January 2023. The July move ended a 14-month pause and marked the start of a new tightening cycle.
The central bank also raised its 2026 growth forecast to 3.3 percent from 2.6 percent in May while keeping its inflation forecast unchanged at 2.7 percent. It raised its 2027 growth projection to 2.9 percent from 2.1 percent while maintaining its inflation forecast at 2.3 percent.
The KOSPI was up 0.56 percent at 6,840 as of 10 a.m., sharply paring an advance of more than 2 percent earlier in the session after the rate hike was announced.
The Korean won strengthened 5.8 won from the previous session to 1,377.6 per dollar at the same time.
Gov. Shin Hyun-song is due to explain the policy decision and updated economic outlook at a post-meeting press conference later Thursday.
AJP Takeaways
- BOK raises the rate to 3.00 percent, delivering consecutive hikes in July and August.
- The Korea-U.S. rate gap narrows to 50 basis points at the lower end of the Fed's target range.
- The hike defies bond-market expectations for a pause, putting Korean financial markets on alert for further repricing.
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