Bank of Korea lifts the base rate to 3 percent, a second consecutive hike

Bank of Korea lifts the base rate to 3 percent, a second consecutive hike

The Bank of Korea raised the base rate to 3 percent, a second consecutive hike, and lifted this year's growth forecast to 3.3 percent.

Why this matters. Variable-rate mortgages, jeonse (전세) loans, and household borrowing all reprice off the Base Rate (기준금리). A Hankyoreh report on a Korea Financial Investment Association survey of 100 domestic bond professionals, taken August 13 to 19, found 79 percent expected a hold and 20 percent a hike.

What changed. The Monetary Policy Board (금융통화위원회) raised the rate 0.25 percentage point from 2.75 percent to 3.00 percent on August 27, per Hankyoreh and Korea Herald. Six of seven members backed the hike, with one dissenting, per Korea Herald. The bank lifted its 2026 growth forecast to 3.3 percent from 2.6 percent in May. Core inflation, which excludes volatile items, rose 2.6 percent in July.

Worth knowing. Bank of Korea Governor Shin Hyun-song called the move a "preemptive action" and said "a gradual pace of rate hikes is expected over the next six months." A majority of board members projected the rate at 3.25 percent six months out, per Korea Herald. The Korea-US policy-rate gap narrowed to 0.75 percentage point, with the Federal Reserve's upper bound at 3.75 percent, per Korea Herald.

One complication. Overseas investment banks including DBS, MUFG, and Citi had mostly expected a hike, per Hankyoreh.

The last time. Consecutive Base Rate hikes have happened on only three prior occasions, per Korea Herald. In 2007 the board lifted the rate in both July and August. It also delivered back-to-back hikes in November 2021 and January 2022. From April 2022 to January 2023 it raised rates seven times, including two 0.5 percentage-point steps.

What's next. The next policy-setting meeting is October 22, per the Bank of Korea calendar. Shin said each upcoming decision remains "live."

Korea This Week

Cheong Wa Dae rejects Supreme Court nominee Son Bong-gi and asks for a new recommendation

Cheong Wa Dae (청와대) rejected Daegu District Court senior judge Son Bong-gi, a Supreme Court nominee, on August 28 and asked Chief Justice Cho Hee-dae for a new recommendation.

What changed. Kang Yu-jung, Cheong Wa Dae senior spokesperson, said the office will not send an appointment-consent motion for Son, named to succeed former Justice Noh Tae-ak. She said the August 18 written recommendation lacked procedural completeness, per Hankyoreh. Kim Seong-soo, a Seoul High Court senior judge, does go to the Assembly.

Worth knowing. Hankyoreh reports this as the first presidential request for a new Supreme Court recommendation since the 1987 constitution. Cho submitted the name in writing on August 18 without prior consultation. Democratic Party of Korea (DPK) senior spokesperson Park Sung-joon said procedural defects should be corrected. People Power Party (PPP) floor leader Chung Jeom-sik said the move violates the constitution.

What's next. The Judiciary Committee hearing is August 31. Cho filed a non-attendance opinion August 28, citing separation of powers and National Assembly Act Article 121, per Hankyoreh.

Special counsel asks for five years for former prime minister Han Duck-soo

Special counsel Cho Eun-suk's team asked a Seoul court for a five-year sentence for former prime minister Han Duck-soo.

What changed. At August 28 closing arguments before Judge Lee Jin-gwan of Seoul Central District Court, the team asked for five years on dereliction and abuse-of-authority charges, per Hankyoreh and JoongAng Ilbo. Co-defendants Jeong Jin-seok, former presidential chief of staff, and Kim Ju-hyeon, former senior secretary for civil affairs, face four-year asks; Lee Won-mo, former secretary for public-office discipline, three years.

Catch up. After then-president Yoon Suk-yeol's December 14, 2024, impeachment, Han as acting president did not appoint three Assembly-elected justices, citing a need for bipartisan agreement. Choi Sang-mok, former finance minister and later acting president, is a co-defendant in a severed case; no sentence was asked this day because of a pending recusal motion.

One complication. Han said he did not delay appointments to affect Yoon's impeachment case, per JoongAng Ilbo. The defense challenged whether the special-counsel statute covers this case and the use of former justice minister Park Sung-jae's notebook photos, per Hankook Ilbo. Han is separately serving a 15-year sentence at second instance on insurrection-related charges; that case is at the Supreme Court.

What's next. Sentencing is October 26 at 2 p.m., per JoongAng Ilbo.

Kia's union approves a wage deal; Hyundai's tentative deal goes to a Monday vote

Kia's union approved a wage deal; Hyundai Motor's tentative deal goes to a ratification vote on August 31.

What changed. Kia members voted 64.1 percent yes on the wage plan and 63.1 percent on the collective agreement, per Seoul Economic Daily. Hyundai reached a tentative deal in a 17th round in Ulsan after 111 days, per Seoul Economic Daily and Korea JoongAng Daily. The packages are not the same.

The numbers.

• Kia: ₩100,000 monthly base-pay rise; management performance bonus 300% plus ₩4 million; quality-improvement bonus 100% plus ₩4.7 million; Autocar Awards ₩4 million; 47 shares; 500,000 special points
• Hyundai: ₩100,000 base including step raises; 400% plus ₩12.7 million; 15 shares; ₩500,000 welfare points

Worth knowing. Hyundai strikes this year totaled 60 hours, including a full-day stoppage. Industry estimates put lost output at about 55,200 vehicles and lost sales at ₩2.3 trillion, per Seoul Economic Daily.

What's next. Hyundai's union votes on August 31. Kia holds a signing ceremony the same day.

Gallup: 65 percent support independent nuclear armament

Gallup Korea found 65 percent of adults support South Korea possessing nuclear weapons, and 30 percent oppose.

The numbers.

• Gallup Korea, August 25 to 27, n=1,001 adults 18+, telephone via random virtual mobile numbers, margin of error plus or minus 3.1 percentage points at 95 percent, per Herald Business and YTN
• Nuclear armament: 65% for, 30% against; PPP supporters 78%, DPK supporters 60%, unaffiliated 64%
• War chance 39%; ages 18 to 29: 54%; 30s: 53%; 40s: 29%. Military stronger than the North's: 70%
• Wartime operational control transfer during President Lee Jae-myung's term: 46% yes, 41% postpone. Academy merger: 58% keep separate, 30% merge

Constitutional Court: Korea must allow birth registration for foreign children born here

The Constitutional Court (헌법재판소) ruled unanimously that Korea must let foreign children born here register their births.

What changed. The August 27 decision is the Court's second finding of a "genuine legislative omission," per Korea Herald. The Family Relations Registration Act covers Korean nationals only. The petitioner is a Vietnamese man who entered in 2008 on a nonprofessional employment visa, later overstayed, and whose daughter was born at a Seoul clinic in April 2019 and later obtained Vietnamese nationality.

Worth knowing. The Court said the state has a duty to legislate registration under Korean law regardless of nationality, immigration status, or whether the birth is registered in the parents' country. Registration is a minimum safeguard, not Korean nationality or a stay permit, per Hankyoreh.

What this means for you. A child born in Korea to foreign parents still has no path to a Korean birth record until the Assembly writes a statute. Registration, if legislated, would not itself confer citizenship or a visa.

What's next. The Court set no deadline. A Court official told Hankyoreh the ruling still functions as an order to legislate promptly.

Watch This Week

• August 31 (Monday). Hyundai Motor's union holds an all-member ratification vote on the tentative wage deal, per Seoul Economic Daily.
• September 2 (Wednesday). Seoul Bankruptcy Court holds an interested-parties meeting on Homeplus's amended rehabilitation plan. The court approval deadline is September 4 (Friday). Public-interest-claim consent stood at 58.1 percent as of August 27, per Korea Financial Times and Asia Business Daily.

Festivals worth checking out

• Through September 6, and opening September 5. Muju Firefly Festival (무주반딧불축제) in Muju, Jeonbuk, is in its last week: night walks in the Gucheondong Valley firefly habitat, free entry, about three hours by bus from Seoul. Gwangju Biennale (광주비엔날레) opens September 5; Asia's oldest contemporary art biennale, English wall texts, book ahead for opening week.

See the full festivals calendar for what's running across the country.

Good Reads

• Seoul Economic Daily. "Koreans Spend on Experiences, Not Things." Starfield Suwon filled a 10-kilometer mall race in 10 minutes. Lotte Department Store ran an escape-room sauna. Performing-arts ticket sales hit a record ₩1.7326 trillion last year, and Koreans took 29.55 million outbound trips. The piece maps a shift toward paid experiences over ordinary goods. (link)

• Seoulstart. "Nunchi and Jeong decoded: Korean social radar and accumulated bonds." The National Institute of Korean Language defines nunchi (눈치) as figuring out another person's mind from the situation. Jeong (정) is the bond that forms through feeling, relationship, and shared life. The Encyclopedia of Korean Culture treats Korean jeong as localized in jeong-deulda (정들다) and jeong-tteoreojida (정떨어지다). A Cross-Cultural Research paper published a nunchi scale tested with Korean and American samples.

• Korea Herald. "Young Koreans to rethink masculinity, femininity at government forum." The Gender Equality and Family Ministry is gathering 100 people aged 19 to 39 at Hanyang University to discuss "teto women" and "egen men," labels with no scientific basis. A Korea Research 2026 survey in the piece puts those who call gender conflict serious at 61 percent, up 4 points from 2025. Minister Won Min-kyung is quoted on replacing those expectations. (link)

• Hankyoreh. "Court finds military-evader dismissal law constitutionally inconsistent." The Constitutional Court found Military Service Act Article 76 constitutionally inconsistent: it forces employers to fire people labeled as evading conscription, with no chance to explain first. The 7-2 vote (five inconsistency plus two unconstitutionality) set a February 29, 2028, Assembly deadline. The petitioner was a conscientious objector later acquitted, then fired after a military-manpower office letter. (link)

• Korea Times. "Seoul opens 40-year-sealed subway passage as K-culture venue." A 335-meter Line 2 passage between Euljiro 1-ga and City Hall, sealed more than 40 years, reopened as K-Culture Station. The first show is "COSMOS," a BIGBANG 20th-anniversary media exhibition through September 27. Fun Station sites also include Yeouinaru Runner Station, Ttukseom Fit Station, and Meokgol Smart Move Station. Mayor Oh Se-hoon is quoted. (link)

That's Seoulstart Korea Weekly for this week. See you next week.