A media official at the Bank of Korea said the monetary policy committee raised the 7-day repurchase agreement rate to 3.00 percent, after it surprised markets by leaving rates unchanged in February.
Fourteen of 16 analysts polled by Reuters expected the Bank of Korea to bump up the base rate by 25 basis points, and most who predicted a rise this week saw a further 25 basis-point hike in the April-June quarter and the rate being brought to 3.50 percent by year-end.
Governor Kim Choong-soo is due to hold a news conference from 0220 GMT to elaborate on the decision and give the central bank's assessment of recent economic conditions.
Annual consumer price inflation soared to a 27-month high of 4.5 percent in February, and a number of economists forecast the figure to quicken to 5 percent this month, well above the upper limit of the Bank of Korea's 2-4 percent target band.