South Korea raises interest rates as inflation, household risks grow

south korea raises interest rates as inflation household risks grow

Sumary of South Korea raises interest rates as inflation, household risks grow:

  • The Bank of Korea is expected to continue its policy tightening cycle with rates tipped to reach 1.50 per cent by the end of 2022, raising concerns about whether households will be able to service their debt repayments.
  • The BOK’s monetary policy board lifted borrowing costs by 25 basis points to 1.00 per cent – a move expected by 29 of 30 analysts in a Reuters poll.
  • The BOK has been at the forefront of global central banks withdrawing the massive monetary stimulus introduced when the pandemic slammed activity in 2020. Its proactive stance has been driven by concerns about financial imbalances with household debt hitting 1.85 quadrillion won (US$1.55 trillion) in the third quarter.
  • “I think the hurdle for further rate hikes will be higher once the policy rate reaches 1.25 per cent.
  • ” While dealing with asset bubbles has been outgoing President Moon Jae-in’s top policy priority, the home price surge across Asia’s fourth-largest economy has continued despite more than two dozen measures to curb it.
  • The three-year treasury bond futures rose as much as 0.3 points after Lee’s comments as traders pared some of their hawkish bets made before Thursday.

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