Bank of Korea Raises Interest Rates to Counter Inflationary Pressure

The Bank of Korea (BOK) today raised its interest rate to 1.5% from 1.25% previously. Analysts had expected the BOK to leave its rates at 1.25%.

Rising inflationary pressures are weighing on South Korea after global oil and commodity prices rose.

The BOK board voted and decided to raise the benchmark seven-day repo rate to 1.5%. This is the highest rate increase since 2019.

The BOK said in its decision, “Currently available information suggests that inflation has accelerated while the recovery of the global economy has somewhat moderated, affected by the Ukraine crisis,” adding, ” The board will judge when to further adjust the degree of accommodation while thoroughly assessing developments related to COVID-19, the risk of a buildup of financial imbalances, monetary policy changes in major countries, geopolitical risks, and the trends of growth and inflation.”

The consumer price index in South Korea rose 4.1% year-on-year in March, the fastest pace in more than 10 years. This represents a further increase after the CPI rose 3.7% year-on-year in February.

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