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The Monetary Policy Committee of the Bank of Korea raised the base rate by 0.25 percentage points to 1.25% per annum. This is because the rising inflation rate due to the recovery of domestic demand is hardly caught, and the US Monetary Authority's move to raise interest rates is accelerating.
This is reporter Jeon Yeon-nam.
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base rate has risen to 1.25% per annum.
The Monetary Policy Committee of the Bank of Korea decided to raise the rate consecutively until this month following the second time last year, returning to the level just before the Corona 19 epidemic in a year and 10 months.
Concerns about inflation have had a major impact on the decision to raise the key interest rate.
In fact, since October of last year, the CPI soared to 3%, which is because the upward trend has hardly been caught.
[Joo-Yeol Lee/Governor of the Bank of Korea: Considering that inflationary pressure is expected to increase significantly more than initially expected, and there is still a great need to reduce the risk of financial imbalance, we have decided to raise the base interest rate by 0.25%.
] The expectation that the Fed will raise interest rates as early as March also influenced the decision to raise rates.
This is a preemptive response because the risk of domestic capital outflow increases if the interest rate gap with the US widens.
The Bank of Korea is highly likely to raise interest rates one or two more times this year, but concerns are raised that it could pour cold water on the recovery in a situation where the economy is uncertain due to COVID-19.
The interest burden on households in debt is also expected to become heavier.
The Bank of Korea predicted that if the base rate rises twice this year by 0.5 percentage points, the total household interest burden will increase by 6.4 trillion won.