The Bank of Korea returned to its usual 25 percentage point rate hike in August after a sharp hike last month in an effort to curb inflation but avoid hurting the economy.
As expected, the Bank of Korea raised its benchmark 7-day repo rate by 25 basis points to 2.50% on Thursday. This marked its fourth consecutive rate hike and the bank is expected to tighten policy further.
Only one of the 27 analysts surveyed by The Wall Street Journal ahead of rate decision forecasts had a normal-sized rate hike following a rare 50 basis point hike in July. rate hike.
The bank on Thursday lowered its GDP growth forecast for South Korea, while raising its inflation forecast for this year.
GDP is now expected to grow by 2.6% in 2022, down from a forecast of 2.7% in May. Export growth – the country’s main growth engine – is losing steam amid a slowing global economy.
However, the bank expects inflation to average 5.2%, up from its earlier forecast of 4.5%, although there are some signs that price growth is peaking.
The Bank of Korea is also under pressure to raise domestic borrowing costs in response to aggressive Fed tightening and a weaker won
Most analysts expect the bank to Rate hikes will continue until 2022, but there is still disagreement over whether and for how long next year.
Correction and enlargement
This item was corrected at 0124 GMT to Reflects that the Bank of Korea raised the benchmark 7-day repo rate to 2.50% in the second paragraph.
