BOK-interest rate

BOK raises interest rate to 1.5 pct amid growing inflation woes

SEOUL, April 14 (Yonhap) -- South Korea's central bank raised its key interest rate by a quarter percentage point Thursday to rein in rising inflation pressure as the ongoing war in Ukraine has sent oil and major commodity prices even higher.

The monetary policy board of the Bank of Korea (BOK) convened a rate-setting meeting earlier in the day and voted to raise the benchmark seven-day repo rate to 1.5 percent, according to the central bank.

The hike came after the BOK has raised the rate in a preemptive and swift manner in recent months to keep a lid on inflation.

Since August last year, the BOK has delivered three rate hikes, including the latest quarter parentage-point increase in January, after maintaining borrowing costs at record lows for about two years to tide over the pandemic. The central bank left the rate unchanged in February, the previous rate-setting meeting.

The BOK's rate hike decision this month came amid persistent worries over rising inflation pressure driven by protracted supply chain disruptions, a rebound in demand from the pandemic, and rising oil and commodity prices sent even higher by the ongoing Russia-Ukraine war.

South Korea's consumer prices jumped 4.1 percent in March from a year earlier, the fastest gain in more than 10 years. The prices accelerated from a 3.7 percent on-year rise in February.

The country's economy, Asia's fourth largest, is on a robust recovery from the pandemic-caused slowdown on the back of strong exports, but it faces increased economic uncertainties at home and abroad amid the pandemic, the Ukraine war and pandemic-prompted lockdowns in major Chinese cities.

Thursday's rate-setting meeting has drawn keen attention as it was held after the U.S. Federal Reserve delivered its first rate increase since 2018 in March to tamp down inflation in what appears to be just the beginning of more and steeper rate hikes going forward.

The BOK has hinted at further rate hikes in the coming months to keep a lid on inflation and household debt despite persistent worries that excessive rate increases could put a damper on economic growth.

BOK Gov. nominee Rhee Chang-yong has underlined the need to determine the direction of monetary policy after analyzing how existing risks, including the Ukraine crisis and the pandemic, will affect economic growth and inflation.

Rhee was named the new BOK governor last month by President-elect Yoon Suk-yeol. He has yet to take office as he is awaiting a parliamentary confirmation.

With the chief post at the bank remaining vacant, Thursday's meeting was presided over by Joo Sang-yeong, one of the monetary policy board members.

He will also speak during a press conference scheduled to be held later in the day, an occasion designed to provide details on the BOK's monetary policy direction.

It is the first time for a monetary policy committee member to serve as the acting chair of a rate-setting meeting and lead a subsequent press conference, a BOK official said.

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