South Korea's central bank is likely to increase its key interest rate twice more this year as the country faces persistent inflationary risks, Barclays Capital said Sunday.
South Korea's central bank raised the key interest rate by a quarter percentage point this month to 3.25 percent for June, following a two-month freeze.
Barclays forecast that the Bank of Korea (BOK) will raise the country's policy rate twice, once in the third quarter and fourth quarter each.
"The focus is on reining in core inflation in view of rising demand pressures and rising wage expectations," a Barclays note said.
"There is a renewed sense of urgency from the Blue House to tame inflation ahead of elections in 2012."
The growth of South Korea's consumer prices surpassed the upper ceiling of the BOK's 2-4 percent inflation target band for the fifth straight month in May.
Core inflation, which excludes volatile oil and food prices, rose 3.5 percent on-year in May, up from 3.2 percent in April and marking the highest level in 23 months.
South Korean consumers in June expected inflation to reach an annual average of 3.9 percent over the next 12 months, unchanged from expectations in the previous month, according to the BOK.
The British investment firm expected the new interest rate hike will take place as early as August.