South Korea’s central bank, the Bank of Korea, raised its benchmark interest rate for the first time in three and a half years to 2.75% on Thursday. This move aims to stabilize a slumping won and counter persistent inflationary pressure.
Economic Context
Asia’s fourth-largest economy has been rebounding faster than expected this year, thanks to a boom in semiconductor exports and investment. Despite this, the local currency remains pressured, with the won weakening 3.4% against the US dollar.
The rate hike aligns the Bank of Korea closely with regional neighbor the Bank of Japan, which recently raised its own benchmark rate to a 31-year high. Central banks in Australia, New Zealand, Indonesia, and the Philippines have already tightened policy.
With the headline inflation figure at a 2-1/2-year high in South Korea, a majority of analysts see the Bank of Korea delivering at least one more rate hike before the end of this year to take the policy rate to 3.00%.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
