SEOUL (Reuters) – The Bank of Korea said on Thursday that long-term growth is best to stabilize prices as soon as possible, as it provided an in-depth analysis of its decision to raise interest rates unusually sharp in July in its quarterly monetary policy report.
As part of its explanation for the move, it said that a quick and significant rate hike is now needed, with the dollar/won exchange rate also a factor.
“Once high inflation persists for a long time, a stronger monetary policy response is required, so a rapid and substantial rate hike is now required to pre-empt inflation expectations,” the central bank said in the report. Long term. “
The Bank of Korea has raised its policy rate by two percentage points to 2 percentage points. 50% Since last August, it has attempted to control inflation, which is close to 24 year high and the final step is 25 a rate hike in August.
It achieved an unprecedented July 50 Basis point rate hike – this is since the Bank of Korea adopted the current policy framework in 1999.
Governor of the Bank of Korea Lee Chang-yong said at the time that his bank would try not to raise interest rates higher than the usual 25 basis points when monetary policy needs to be tightened again.
Central Bank said it believes inflation will remain high Consumer demand remains strong and supply-side uncertainty remains high after Russia stopped supplying natural gas to Europe. A rare July 50-bp rate hikes are also a factor.
“As the Fed tightens its pace of monetary tightening, it is passing a higher rate Bringing additional inflationary pressure to other countries,” the Bank of Korea said in a report.
The Korean won fell sharply against the dollar in the first half of the year, pushing up domestic consumer prices by 0.4 percentage points, the Bank of Korea added. . During this period, the Korean won fell 8.4% against the US dollar.