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Monday, January 30, 2023

South Korea Raises Rates to Tackle Inflation

Concerns over growing prices and family debt have prompted South Korea’s central bank to raise interest rates for the second time this year.

Economists predicted the Bank of Korea to raise interest rates by a quarter of a percentage point to 1%.

It’s the latest central bank to do so as policymakers struggle to strike a balance between the post-pandemic economy and growing prices.

On Wednesday, New Zealand boosted interest rates for the second time in as many months.

The Bank of Korea noted in a statement that “the Korean economy has continued its strong recovery.”

“Over a medium-term horizon, the Board will continue to conduct monetary policy in order to sustain economic recovery and stabilize consumer price inflation at the target level, while paying attention to financial stability,” it said.

The bank also boosted its inflation forecast to 2.3 percent this year and 2 percent in 2022, implying that more rate rises are on the way.

“In the face of rising property prices and family debt, the Bank of Korea has made it plain that limiting financial risks is its top concern. Both are continuing to develop significantly, according to the most recent statistics “Alex Holmes, Asia Economist at Capitol Economics, echoed this sentiment.

Since the coronavirus outbreak began in August, South Korea became the first major Asian economy to hike interest rates.

It was the country’s first rate rise in over three years, putting it at the vanguard of a global push to unwind the massive sums of stimulus put in place to assist countries cope with the impact of Covid-19.

Policymakers want to do this by keeping a lid on increasing prices and containing expanding financial imbalances.

The US Federal Reserve and the Bank of England, among other major central banks across the world, are likely to tighten monetary policy in the coming months.

The Reserve Bank of New Zealand (RBNZ) boosted its official cash rate by a quarter-point to 0.75 percent on Wednesday.

The RBNZ raised rates for the second time in two months as the country’s jobless rate fell and inflation and property prices rose.

It occurred as the New Zealand government announced intentions to reopen the country’s borders next year, allowing outsiders to enter.

The decision relaxes severe restrictions that have kept many people and visitors away since the Covid outbreak began.

Cedric Blackwater
Cedric Blackwater
Cedric is a journalist with over a decade of experience reporting on local US news, and touching on many global topics. He is currently the lead writer for Bulletin News.

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