South Korea’s Monetary Policy Board of the Bank of Korea decided today to raise the Base Rate to 2.25%, the highest since mid-2019 as expected. The move means the BOK has risen rates by 150 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. With consumer inflation at 6 per cent in June, the highest level since 1998 the Bank is in one of the most forceful tightening campaigns ever.
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 Monetary Policy Decision (July 12, 2022)
It was the second-rate review after taking office in April for Governor Rhee Chang-yong. He and his monetary policy board voted to raise interest rates by a half of a percentage point to 2.25%, the highest since mid-2019. All but one of the 28 analysts polled by Reuters expected a hike.
Governor Rhee in May said the bank could consider big-step interest rate raises in coming months such as 50 basis point hikes, depending on data that will become available around July and August.
Inflation & Unemployment
BoK governor Chang-yong Rhee signalled that larger rate rises were unlikely to be repeated in future monetary decisions.
“We raised the rate by 50 basis points this time because there’s greater damage if the upward inflationary pressure grows further,” he said.
“It’s desirable to go gradually with 25 basis point hikes and monitor the situation if inflation remains at the current trajectory.”
South Korea’s unemployment rate edged up to 2.9 per cent in June, from 2.8 per cent in May. Economists had expected the jobless rate to remain unchanged.
Source: Bank of Korea, Reuters
From The TradersCommunity News Desk