Seoul, October 12 (QNA) – South Korea’s central bank delivered another big-step rate hike Wednesday as it is striving to bring inflation under control despite worries that it could excessively slow down economic growth.
Earlier in the day, the BOK’s monetary policy board held a meeting and decided to raise the benchmark seven-day repo rate from 2.5 percent to 3 percent, according to the central bank. It is the first time in about 10 years that the rate has risen to the 3 percent range.
Wednesday’s rate increase marked the eighth rate hike — by a combined 2.5 percentage points — since August last year when the BOK begun raising the borrowing cost that had stayed at a record low to shore up the pandemic-hit economy.
It also represented the fifth straight increase and marked the second big-step rise since the first-ever 50 basis-point hike in July.
The country’s consumer prices, a key gauge of inflation, rose 5.6 percent on-year in September. The increase was slightly down from a 5.7 percent jump in August but remained high and could rise again anytime depending on the oil and energy price trajectory.
Policymakers worry that capital outflows could accelerate the South Korean currency’s slide against the USD and compound Seoul’s efforts to rein in inflation as a weak currency makes imports more expensive. The won has fallen around 17 percent against the dollar so far this year.
Concerns are growing that sharp increases in interest rates will increase the financial burden on debt-laden households, increasing the likelihood that those without ample financial resources will default on their loans and reduce their spending.
The South Korean economy is facing a state of increasing uncertainty, including slowing export growth and a growing trade deficit that could worsen if monetary policy tightening in major countries prolonged, pushing the global economy into recession. (QNA)
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