Bank of Korea raises benchmark interest rate to 1.25%

The Bank of Korea turned its key interest rate back to 1.25 percent or the pre-COVID-19 levels in an effort to respond to inflation rising more than 3% and Washington’s acceleration of austerity measures. 　

The central bank of South Korea on Friday opened the Monetary Policy Committee to increase the key interest rate of 1.00 percent a year to 1.25 percent. That is, the key interest rate returned to the pre-pandemic levels in one year and 10 months after going down the lowest ever (0.5 percent) after the COVID-19 situation unfolded.

The BOK raised the key interest rates over two straight meetings of the Monetary Policy Committee – last November and this time – for the first time in 14 years since 2007 when the global financial crisis took place. That is, the financial authorities take inflation levels and the pace of U.S. austerity measures seriously. “It is worrying that the upward pressure on prices is a bigger and wider phenomenon than expected,” BOK Governor Lee Ju-yeol said in a press conference on Friday. He implied another interest rate rise by describing the current interest rate as accommodative.


Min-Woo Park minwoo@donga.com · Hye-Ryung Choi herstory@donga.com