Free Trial

MNI BRIEF: BOK Raises Policy Rate To 0.75% From 0.50%

(MNI) Tokyo
TOKYO (MNI)

The Bank of Korea on Thursday raised its policy interest rate to 0.75% from a historical low of 0.50%, for the first rate hike since November 2018, despite uncertainty over the consequences of widening Covid-19 infections.

"The Board will continue to conduct monetary policy in order to sustain the recovery of economic growth and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability," a BOK statement said.

Chances of a rate hike picked up steam this week as the South Korean fell slightly against the dollar. Still, chances of the BOK holding steady were earlier in the market because of concerns about the impact of higher Covid-19 cases.

The won gained against the dollar after the Thursday decision was announced.

INFLATION, FINANCIAL IMBALANCES

Ahead, the BOK, the first OCED central bank in Asia to hike rates, signalled vigilance on inflation.

"The Board will gradually adjust the degree of monetary policy accommodation as the Korean economy is expected to continue its sound growth and inflation to run above 2% for some time, despite ongoing uncertainties over the virus."

"In this process the Board will judge when to further adjust the degree of accommodation while thoroughly assessing developments related to Covid-19, changes in the pace of growth and inflation, the risk of a buildup of financial imbalances, and monetary policy changes in major countries," the BOK said.

GLOBAL, PANDEMIC VIEWS

The BOK also commented on the outlook for a global economic recovery and the pandemic.

"Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the severity of the resurgence of COVID-19 and the status of vaccine distribution, as well as by monetary policy changes in major countries and their effects."

The BOK in March 2020 lowered the key policy rate to 0.75% from 1.25% to support the economy amid the spread of coronavirus and in May lowered the rate to a historical low of 0.50%.

MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com
MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.