For the second consecutive session, the Central Bank of Korea has adjusted interest rates by 25 basis points to 3 per cent, against the backdrop of inflationary pressures, rising temperatures in Seoul City and expected economic improvements. This means that the Republic of Korea ' s monetary policy continues to be tightened, and that the local stock, property and encrypted asset markets face higher financial costs.
Twice in a row.
After the Korean Central Bank announced a raise on Thursday, the base rate rose from 2.5 per cent to 3 per cent, up from July. Of the seven members of the Monetary Policy Committee, six supported the interest rate increase, while Huang Jianichi maintained the interest rate.
This was the second consecutive interest rate hike by the Central Bank of Korea after a period of laxity. The July increase was the Bank ' s first increase in interest rates since January 2023, and the latest decision has pushed the cost of borrowing back to the level before February 2025.
Core inflation and home price factors
Although overall consumer inflation fell to 2.8 per cent in July, core inflation, which is more of a policy concern, rose to 2.6 per cent, a new high since December 2023. This gives the Central Bank of Korea reason to continue to maintain a restrictive position.
The city also constitutes a pressure. Seoul's apartment sale price increased by 2.5 per cent in June, the largest single-month increase since June 2021. The acceleration of housing prices has also heightened concerns about household leverage and financial stability.
At the same time, the Central Bank of Korea increased its economic growth expectations, with the economy expected to grow by 3.3 per cent in 2026 and 2.9 per cent in 2027, up from 2.6 per cent and 2.1 per cent projected in May. The strong export of semiconductors, as well as the demand-driven investment of the global AI, are seen as the main supporting factors.
Pressure on encryption trade preferences
The impact of higher interest rates goes beyond the bond and real estate markets. The Republic of Korea has been one of the most active markets for Asian bulk transactions, with a high level of local capital participation in highly volatile assets.
South Korea's encryption trade activity has recently recovered significantly. Upbit once had a single-hour trade volume of about 1.15 trillion won, or $830 million, and XRP and TRUMP attracted new bulk demand. By the next day, its single-day transactions had risen to approximately $3.81 billion.
Against this background, the Central Bank of Korea has entered an interest rate increase cycle that has a more realistic impact on the digital asset market. Higher interest rates on deposits and borrowing costs usually increase the return on holding cash while increasing the cost of leveraging transactions, thus reducing the attractiveness of some speculative positions.
Korean investors have long preferred to trade in a single banknote. In the example of Upbit, XRP recently traded more than twice as much as a bitcoin, indicating that local liquidity is moving faster between currencies.
At the same time, the Republic of Korea is also moving forward with the regulation of digital assets, including the preparation of an encryption tax from 2027, and the development of the KRW1 and other Korea dollar stabilization projects. For the market, the next focus is whether 3% interest rate levels are enough to contain inflation and the market. If price and house price pressures persist, the Central Bank of Korea is likely to further tighten its policy.