Economic Buzz: South Korea Raises Interest Rate By 50Bps

12 Oct 2022 , 01:20 PM

South Koreas central bank lifted its key interest rates on Wednesday, citing tightening stance of the US Federal Reserve and stubbornly high inflation. The Monetary Policy Board of the Bank of Korea decided to raise the Base Rate by 50 basis points to 3.00 percent from 2.50 percent, as widely expected. The central bank has hiked its policy rate by altogether 250 basis points in the current tightening cycle that began in August 2021. Domestic economic growth is expected to slow due to weaker export growth. The bank expects GDP growth for this year to be generally consistent with the August forecast of 2.6 percent, but that for next year was projected to be below the previous forecast of 2.1 percent. The bank said consumer price inflation will remain high in the 5-6 percent range for a considerable time as the impact of the rising Korean won to US dollar exchange rate acts as additional inflationary pressure. Inflation is seen at 5.2 percent this year and 3.7 percent in 2023, but upside risks are judged to be high due to the rising Korean won to US dollar exchange rate and production cuts by major oil-producing countries, despite downward pressures from the economic slowdown.Powered by Commodity Insights