The Bank of Korea hiked its benchmark interest rate by a quarter of a percentage point to one-point-75 percent on Friday. 

It was the first increase since a 25 basis point rise last November, and raises the country’s policy rate to a three-and-a-half year high. 

The hike had been widely anticipated as the central bank indicated numerous times in recent weeks that it was ready for tighter monetary policy. 

Despite the weak economy, household debt continues to reach new highs, and now stands at more than one-thousand-500 trillion won. 

The widening rate gap between South Korea and the U.S. has also fanned concerns of possible capital outflow.