Drastic U.S. Rate Hike Puts BOK Under Pressure

  • By You So-yeon

    November 04, 2022 12:22

    The U.S. Federal Reserve has hiked the benchmark interest rate by 0.75 percentage points for the fourth time, increasing pressure on the Bank of Korea to follow suit. 
    The Fed's giant step puts the U.S. benchmark rate at over four percent, a full percentage point higher than Korea's. That puts enormous pressure on the Korean won, which has already fallen to record lows.
    Normally the BOK tries to keep one step ahead of the Fed, but last month it only raised the rate by a half percentage point to three percent. 
    The BOK's next rate-setting meeting is on Nov. 24. 
    A banner in front of a bank in Seoul shows interest rates on Thursday. /Yonhap
    Inflation here is rising again for the first time in three months, but the central bank must also be wary of weakening growth and record household debt that could result in a credit crunch if the interest burden on consumers becomes too much. 
    If this month's interest hike is too small, on the other hand, foreign investors could leave Korea in droves in search of higher returns.  
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