[Edaily Reporter Jang Young-eun ] It has been confirmed that concerns over inflation were the primary reason the Bank of Korea ended its one-year period of interest rate freezes last month and moved to raise rates. An improving economy and financial imbalances also served as justifications for the rate hike. The Bank of Korea has stated that it needs to continue its policy of raising interest rates going forward, while maintaining a cautious stance that it will determine the timing and magnitude of additional hikes based on economic indicators.

According to the “Minutes of the 13th Monetary Policy Committee Meeting of 2026 (held on July 16),” released by the Bank of Korea on the 4th, committee members unanimously expressed concern that core inflation could remain elevated for a considerable period. Robust growth driven by the semiconductor boom was identified as a source of demand-side inflationary pressure, and the Bank judged that a benchmark rate hike was necessary to preemptively curb risks of financial imbalances, such as rising housing prices in the Seoul metropolitan area.

Throughout the minutes, hawkish (monetary tightening-oriented) remarks emphasizing the need for an interest rate hike predominated. One MPC member stated, “Consumer prices are expected to continue rising at a high rate of around 3% for the time being,” adding, “Demand pressures stemming from the economic recovery will likely cause the upward trend in core inflation to intensify as well.” Another member warned, “Although supply-side inflationary pressures have eased, inflationary concerns are likely to persist for the time being due to demand-side factors stemming from accelerating growth and wage increases, as well as the persistently high exchange rate.”

Concerns were also expressed that the inflationary trend could persist for a long time. One MPC member remarked, “Just as much as the short-term rise in inflation, there is concern that price pressures may remain at high levels for a considerable period, potentially causing inflation to become ‘de-anchored’ from the Bank’s 2% target.” Another member emphasized the need for a “preemptive monetary policy response,” stating, “We expect underlying inflationary pressures to intensify.”

However, even amid unanimous support for the benchmark rate hike, the members expressed a cautious stance on the future policy path, adding the caveat that “the timing and pace of further hikes will be determined while monitoring the extent of inflationary pressures, the trend of economic improvement, and financial stability.”

According to last month’s consumer price trends released by the National Data Agency, consumer prices in July rose 2.8% year-on-year. This marks a return to the 2% range for the first time in three months, following two consecutive months—May (3.1%) and June (3.2%)—in which the rate remained in the 3% range. However, the rate still significantly exceeds the Bank of Korea’s target (2%), and the core inflation rate accelerated compared to the previous month. The Bank of Korea projected that while the government’s price stabilization measures, such as the maximum oil price cap, will help bring prices down in the future, core inflation is expected to show a “sticky” trend due to accumulated cost pressures and a recovery in consumption.

Meanwhile, voices were raised emphasizing the need to address deepening polarization and implement structural reforms. One Monetary Policy Committee member stated, “It is time to give serious consideration to the polarization evident across various sectors of the economy and devise solutions through close policy coordination with relevant agencies,” adding “Given the current political and economic conditions, I believe now is the optimal time for structural reforms, including in the labor sector. We must strengthen efforts to raise the potential growth rate—which is currently on a downward trend—by improving productivity through bold and timely structural reforms.”