November 25, 2022 09:39
The Bank of Korea in its last monetary policy committee meeting of the year on Thursday raised the base interest rate by another quarter percentage point to 3.25 percent.
The BOK has raised the rate six times now since April, reaching the highest point since June 2012.
BOK Governor Rhee Chang-yong said, "Inflation is expected to remain high at around five percent until early next year. Unless we curb it, the macroeconomic cost will be huge."
Inflation has been hovering above five percent since May.
But the increase was smaller than the 0.5 percentage point hike last month. "We took into consideration that foreign exchange risks are easing and there are limits to raising funds in the short-term financial market."
The Korean won has rallied to the W1,300 level against the U.S. dollar, which eased pressure on the BOK to protect the exchange rate, while businesses are having a tough time borrowing money due to a drop in investor appetites for corporate bonds.
The central bank slashed its economic growth forecast for next year from 2.1 percent to 1.7 percent. "The global economy will cool down rapidly next year due to interest rate hikes in every country, supply chain disruptions and slowing growth in China, so domestic growth will also fall below previous expectations," it said.
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