South Korea has become the first major Asian economy to raise interest rates since the coronavirus pandemic began.
The Bank of Korea increased its base rate of interest from a record low of 0.5% to 0.75%.
The move is aimed at helping curb the country’s household debt and home prices, which soared in recent months.
Central banks around the world are trying to balance the impact of ongoing Covid-19 infections against economic risks such as high inflation.
It is the first time the Bank of Korea has raised its main interest rate for almost three years.
The decision comes as the central bank attempts to balance helping to support the country’s economic recovery against the risks of surging debt and rising inflation.
Policy makers for Asia’s fourth largest economy had been signalling that they were ready to increase the cost of borrowing since May.
The move was delayed as the latest Covid-19 outbreak put the country into a partial lockdown last month.