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BOK hints at another interest rate hike

Posted December. 25, 2021 07:28,   

Updated December. 25, 2021 07:28


The Bank of Korea (BOK) has hinted at raising benchmark interest rates again, saying it will further adjust the interest rates next year. Although the central bank did not specify the timing of a rate hike, it is expected to raise the rate, which is currently at 1.0%, once again in January next year and consider additional hikes in the second half of next year.

In a report titled Monetary and Credit Policy Direction for 2022 released on Friday, the BOK said it would stabilize the inflation rate at a 2% level and alleviate the risk of financial imbalance amid continued recovery of economic growth, adding it would further adjust interest rate next year. The BOK revealed its goal of controlling inflation by raising interest rates and slowing the pace of household debt growth while preventing a shock to the economy.

Market experts believe that there would be two to three times interest rate hikes next year, raising the key interest rate from 1.0% to 1.50-1.5%. The prediction is based on the fact that inflation keeps going up. The BOK predicted that next year’s consumer price inflation rate will drop to 2% but added that there could be more upward pressure than expected. Last month, the consumer price growth stood at 3.7%, the highest in nine years and 11 months. If inflation is not curbed even after an interest rate hike early next year, the BOK may move up the timing of an additional rate hike.

Min-Woo Park minwoo@donga.com