South Korea's economy expanded at a faster-than-anticipated pace in the second quarter, propelled by the artificial intelligence-driven semiconductor boom, providing grounds for potential further interest rate hikes.

The nation's central bank reported on Thursday that gross domestic product increased by 0.6% quarter-on-quarter, following a 1.8% rise in the first quarter. This figure surpassed the median forecast of 0.4% from economists surveyed by Bloomberg. While the growth moderated from the first quarter's stellar performance, which was the fastest pace since late 2021, the data released on Thursday extends a series of economic indicators that have outperformed expectations.

This trend of robust data has prompted the government, the central bank, and the International Monetary Fund to revise their growth projections for South Korea upwards on multiple occasions.

The latest economic strength offers a basis for monetary policymakers to contemplate additional rate increases in the coming months. This follows their initial rate hike last week, the first such move since 2023. Surveys of economists indicate expectations for another rate adjustment in October, with a minority anticipating a potential move at the upcoming policy meeting on August 27th.