Korea Monetary Policy


Central Bank raises interest rates for second time in the year

At the monetary policy meeting on 16 November, the Bank of Korea (BoK) decided to raise the 7-day repurchase rate by 25 basis points, from 2.25% to 2.50%. The decision, which surprised market analysts, represents the first rate hike in the last four months and the second this year. In its statement, the Central Bank acknowledged the continued pick-up in domestic economic activity in the recent months. The Bank expects demand-pull price pressures and rising commodity prices to continue, which is likely to push inflation higher. Moreover, the phrasing of the monetary statement suggests further interest rate hikes going forward. In its statement, the Bank of Korea dropped any reference to keeping an accommodative policy, which had been present in its monetary policy statements since April 2009. In addition, the wording suggests a shift in priorities from ?economic growth? to ?price stability?.

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