South Korea’s central bank said that its Monetary Policy Board hiked the key rate to 2.25% from 1.75%, following a 25-basis-point increase in the previous meeting in May.

It is the first time that the central bank has raised the benchmark rate by 50 basis points, taking a so-called “big step”.

BOK governor Rhee Chang-yong said that the central bank took preemptive action to temper expectations of higher inflation. “We thought it is important to respond with policy (measures), as expectations for inflation are spreading while consumer prices and wages are strengthening each other,” he said.

The chief central banker said that the BOK would raise the rate gradually over time, hiking it by increments of a quarter percentage point, if inflation slows after peaking in the late third quarter or early fourth quarter.

The announcement comes after South Korean inflation hit a nearly 24-year high of 6% last month, burdening Asia’s fourth-largest economy as it faces the risk of a second-half recession amid low corporate investment and weak private consumption.

The Yoon Suk-yeol government is wrestling not only with high inflation but also a growth slowdown. The economy expanded just 0.6% in the January-March quarter, slower than the revised 1.3% expansion in the final three months of 2021.