Bank of Korea Raise Rates Again To 3.00% as US Dollar Batters Won and Yen

South Korea’s Monetary Policy Board of the Bank of Korea decided today to raise the Base Rate to 3.00%, the highest since mid-2019 as expected with continuing US dollar strength. The move means the BOK has risen rates by 225 cumulative basis points since August 2021. This was the biggest increase since the central bank adopted interest rates as its primary policy tool in 1999. Consumer prices in South Korea rose 5.6% year-on-year in September 2022, easing slightly from last month’s 5.7% and below the consensus forecast of 5.7%.

Bank of Korea

The Bank of Korea has risen rates from a record low of 0.5 percent amid uncertainty over the recent spike in COVID-19 cases. 

South Korea Interest Rate

South Korea Monetary Policy Decision (October 12, 2022)

Inflation & Growth

Consumer prices in South Korea rose 5.6% year-on-year in September 2022, easing slightly from last month’s 5.7% and below the consensus forecast of 5.7%. Governor Rhee Chang-yong recently said inflation is expected to peak in October but remain high for a considerable time. He expected inflation to stay over 5% at least until the end of Q1 2023.

The committee projected that the 2022 GDP to grow by 2.6%, consistent with the August forecast, reflecting the global economic slowdown. For 2023, the economy is estimated to expand below the August forecast of 2.1%. Policymakers flagged that further rate hikes were needed, and they will determine the magnitude based on the degree of persistent inflation, monetary policy in major countries, capital flows, and geopolitical risks.

Source: Bank of Korea

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