The bank has constantly mentioned that it is the right time to address adverse effects caused by years-long low borrowing costs.
The BOK has been under pressure to adjust the rate throughout the year to curb high-flying real estate prices and ballooning household debt.
Korea’s household credit, which surpassed 1,500 trillion won (US$1.33 trillion) as of the end of September, has been on a record-breaking increase for nearly four years thanks to the government-led economy boosting measures and expansionary monetary policy.
Such eased borrowing cost and regulations have caused an excessive supply of liquidity in the market, inflating property prices.
Moreover, the central bank has to take the widening rate difference between Korea and the US into account in the remaining months of 2018.
With this increase, the Korea-US rate gap reduced to 0.50 percent.
By Song Seung-hyun and newswires (firstname.lastname@example.org)