South Korea raises rates again to 3% amid inflation

South Korea's central bank raised its base interest rate on Thursday from 2.75% to 3.0%, its second increase in a row, saying growth remained strong and inflation was likely to stay elevated because of higher energy costs.

The Bank of Korea said the economy had grown faster than expected, supported by exports and recovering domestic demand. It said preemptive action was needed to stop inflationary pressure from spreading.

Consumer prices rose 2.8% in July from a year earlier, slightly below June's rate but still above the bank's 2% target.

The central bank also lifted its economic growth forecasts to 3.3% for this year and 2.9% for next year. In May, it had forecast growth of 2.6% this year and 2.1% next year.

The bank said exports and investment remained strong, helped by the semiconductor sector and a gradual recovery in consumption. South Korea's two largest chipmakers, Samsung Electronics and SK hynix, have reported large profit increases linked to demand for advanced chips used in artificial intelligence.