The Bank of Korea raised its benchmark seven-day repurchase rate by 25 basis points to 3.00% at its August 2026 meeting, marking a second consecutive hike and the first back-to-back increases since early 2023. The move, predicted by 18 of 35 economists in a Reuters poll, took the policy rate to its highest level since February 2025 as inflation stayed above target and financial stability risks persisted. The central bank revised up its 2026 growth estimate to 3.3% from 2.6% projected in July, left this year’s inflation forecast unchanged at 2.7%, and projected 2.9% growth in 2027, citing stronger-than-expected expansion and a semiconductor boom fueled by global AI demand. July core inflation climbed to 2.6%, the highest since December 2023, while headline consumer prices rose 2.8%, and Seoul home prices jumped 2.5% month on month in June—the largest gain in five years. Analysts’ median expectation is now for one more hike in the first quarter of 2027 and then a hold, with some lifting terminal-rate views to 3.50%; policy-sensitive treasury bond futures fell as much as 0.28 points to 103.04 after the decision. The increase narrowed the gap with the U.S. policy rate to 0.75 percentage point.