South Korea has become the first major Asian economy to raise interest rates since the coronavirus pandemic began.
The move is aimed at helping curb the country's household debt and home prices, which soared in recent months, BBC reported.
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.
Policy makers for Asia's fourth largest economy had been signalling that they were ready to increase the cost of borrowing since May.