Bank of Korea Boosts Call Rate 0.25%

The call rate (the short-term interest rate for money transactions between financial houses), the standard against which long and short-term market interest rates are reflected, climbed 0.25 percentage points. The Bank of Korea (BOK) held a Monetary Board meeting on Thursday and decided to raise the call rate from the annual 4.25 percent to 4.5 percent.

The call rate has gone up again in two months since June this year, which is the fifth rise since last October when BOK began to hike it up in earnest.

It is now up to its highest level since it hit the annual rate of 4.75 percent in July 2001.

“International oil prices are going up faster than expected and there is a lot of liquidity in the market, all resulting in inflationary pressures,” said BOK Governor Lee Seong-tae. “We adjusted the call rate to stabilize prices.”

With the announcement of the higher call rate, banks such as Kookmin, Woori, Shinhan, Kiup and Korea Exchange all declared their plans to raise deposit interest rates by 0.1-0.3 percent points. Interest rates for loans, linked to market rate of interest, are also expected to climb soon.

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