The Bank of Korea has raised interest rates for the first time since the onset of the global financial crisis.
South Korea's central bank increased the rate from a record low of 2% to 2.25%.
It also forecast continued economic recovery, despite sluggish growth in many overseas economies, and warned of increasing inflationary pressures.
The BBC reports the rate rise is its first since August 2008.
The bank has forecast that the South Korean economy, the third largest in Asia, will expand this year at its fastest rate since 2006.