South Korea hikes interest rates sharply again as the Federal Reserve moves to depreciate its currency

SEOUL – South Korea’s central bank raised interest rates by 0.5 percentage points on Wednesday for the second time since July. soaring dollar Import inflation accelerated due to aggressive US monetary policy tightening.

The Bank of Korea (BOK) raised its benchmark policy rate by 50 basis points to 3% on Wednesday, bringing the total rate hikes since last August to 250 basis points.

A Reuters poll found that 23 of 26 analysts expected a 0.5 percentage point hike, while the remaining three expected a 1/4 percentage point hike.

of the US Federal Reserve 3 75 basis point hikes Promoting the dollar’s appreciation against most other currencies, it forced policymakers around the world to reconsider the risks of renewed inflationary pressures and capital outflows.

A 17% depreciation in the won this year could boost prices of imported goods and boost consumer prices.

Governor Lee Chang-yong has repeatedly said that inflation is a top priority after inflation surged to a 24-year high in July before slowing in August and September.

The BOK’s move contrasted with the Reserve Bank of Australia’s move last week, which surprised the market with a smaller-than-expected 25 basis point rate hike as it tried to keep inflation in check without collapsing the economy.

The median poll forecast had shown the BOK base rate to be 3.25% by the end of the year, peaking at 3.5% in the first quarter of 2023.

Nearly half of respondents in a Reuters poll expected the benchmark rate to reach 3.75% in the first quarter of next year. Her 2% target for BOK.Reuters