The Bank of Korea (BOK) raised the key interest rate by 0.25% to 2.50% at its meeting today (Aug. 25), after increasing it by 0.50% in July, in a bid to quickly ease rising inflationary pressures amid the rising cost of importing energy and other key commodities.
This latest rate hike is the seventh since the BOK raised the policy rate last August for the first time in 13 months to reverse monetary easing.
This rapid acceleration of the rate hike is intended to curb inflation, which has been fueled by high energy costs and rising import prices for other key commodities.
The consumer price index (CPI), South Korea’s main measure of inflation, rose 6.3% in July from a year earlier. This is the highest rate in almost 24 years.
Inflation expectations, i.e. public projections for price increases over the next year, were still high at 4.3% in August. This was only a slight decline from the record level of 4.7% in July.