The Bank of Korea raised interest rates for the first time in history six consecutive times (April, May, July, August, October, and November) today (24th) to catch consumer price inflation, which is still in the 5% range.
However, considering the possibility of adjusting the pace of monetary tightening in the US, stable won/dollar exchange rate, risk of capital and credit crunch, and economic recession, the pace was changed from the big step (0.50% point increase in the base rate) last month to the baby step (0.25% point increase) this month. narrowed it down.
The Bank of Korea Monetary Policy Committee (hereinafter referred to as the Monetary Policy Committee) raised the base interest rate from the current 3.00% per annum by 0.25 percentage point to 3.25% at a monetary policy direction meeting held from 9 am today.
The base rate rose by 0.25% points seven times and twice by 0.50% points between August and November of last year and January, April, May, July, August, and October of this year and about a year and three months up to this day, all of which rose by 2.75 percentage points. .
The reason why the MPC has not stopped the hike is because it judged that the trend of inflation has not yet clearly stopped.
The October consumer price index (109.21) rose 5.7% from the same month last year.
After peaking in July (6.3%), the rate of increase fell in August (5.7%) and September (5.6%), then rose again in three months.
The expected inflation rate (general population), which corresponds to the inflation rate forecast for the next year, was 4.2% in November, lower than October (4.3%), but maintained at the 4% level for the fifth month since the record high (4.7%) in July. there is.
On the 2nd (local time), Korea (3.00%) and the United States (3.75-4.00%), which widened up to 1 percentage point due to the unprecedented 4th consecutive giant step (rising the base interest rate by 0.75% point) of the US Federal Reserve (Fed) The difference between the base rate and the base rate also served as a major reason for the hike.
From the point of view of the won, which is not a key currency like the dollar (the basic currency for international payments and financial transactions), if the base interest rate is significantly lower than that of the United States, the risk of foreign investment funds withdrawing and the value of the won falling increases.
With today's baby step, the gap with the United States has narrowed to 0.75 percentage points.
However, if the Fed takes at least a big step next month, the gap is expected to widen again to 1.25 percentage points.