South Korea’s central bank raised its base rate on Thursday, further tightening policy to fight inflation.
The Bank of Korea increased its benchmark seven-day repurchase rate by 25 basis points to 1.5%, which was its fourth rate increase since August 2021.
The bank, which is waiting for Governor-designate Rhee Chang-yong to take office after a confirmation hearing next week, has signaled that stronger-than-expected price growth warrants more rate increases later this year.
The bank acted faster than expected. All 20 analysts polled by The Wall Street Journal ahead of Thursday’s decision had expected the bank to keep tightening policy, but differed over the timing and pace. Some 13 forecasted the next rate increase in May and the remaining seven expected it in April.
The bank is striving to curb surging inflation, fueled by soaring prices of commodities in the wake of global supply bottlenecks, the war in Ukraine and pandemic-era stimulus.
Headline consumer inflation in South Korea accelerated to 4.1% in March–the fastest pace in more than a decade, staying on course to overshoot the bank’s earlier 3.1% forecast for 2022 and its annual 2.0% target.
South Korea’s economy expanded 4.0% and its inflation rate averaged 2.5% in 2021.