South Korea’s central bank on Wednesday raised its key interest rate by an unprecedented 0.5 percentage points to combat rising inflationary pressures caused by high energy and commodity prices.
According to the central bank, the Bank of Korea Monetary Policy Board (BOK) held an interest rate setting meeting earlier in the day and voted to raise the seven-day base redemption rate from 1.75% to 2.25%.
This marked the first significant rate hike by the Bank of Korea and the sixth increase in borrowing costs since August last year, when the central bank began to wind down its loose monetary policy, which it had been running for almost two years to support the coronavirus-hit economy.
Today’s rate hike comes after two consecutive 0.25 percentage point hikes in April and May, the first time the bank raised interest rates three times in a row.
South Korea is grappling with rapidly mounting inflationary pressures amid rising energy and commodity prices due to a recovery in pandemic-hit demand and prolonged supply chain disruptions exacerbated by the ongoing war in Ukraine.