In the aftermath of the COVID-19 outbreak last year, the base interest rate, which was lowered to an all-time low (0.5%), rose by 0.25 percentage points (p) for the first time in 15 months.
It means that the "era of ultra-low interest rates" led by the BOK for a year and a half to release money in defense of the economy has come to an end.
The Bank of Korea Monetary Policy Committee (hereinafter referred to as the Monetary Policy Committee) decided to raise the base rate by 0.25 percentage points from the current 0.5% per annum to 0.75% at the Monetary Policy Direction Meeting today (26th).
On March 16 last year, the MPC made a so-called 'big cut' (1.25% → 0.75%) of lowering the base interest rate by 0.5 percentage points as the economic recession was expected due to the impact of Corona 19, and on May 28, an additional cut (0.75%) → 0.5%), the interest rate was quickly cut by 0.75 percentage points in two months.
Since then, the base rate has been frozen nine times in July, August, October, and November last year and in January, February, April, May and July of this year, and finally raised today for the first time in 15 months.
Moreover, it is the first time in two years and nine months (33 months) since November 2018 (1.50 → 1.75%) that the Monetary Policy Committee has decided to raise the base rate.
The Monetary Policy Committee has changed its monetary policy stance in this way because the 'financial imbalance' such as an increase in household loans and an increase in asset prices has worsened as a side effect of the release of a lot of money in the market, and concerns about inflation (inflation) are growing.
In addition, the Bank of Korea's perception and outlook that the economic recovery is strong enough to withdraw money from the market was reflected in the base rate hike.
The gap with the US Federal Reserve (Fed) base rate (0.00-0.25%) widened to 0.5-0.75 percentage points (p) due to the base rate hike.Keywords: