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The South Korean central bank yesterday raised interest rates for the third time since the summer, underscoring the board’s determination to swiftly curb inflation and financial risks, and its belief that the economy can weather outbreaks of COVID-19 with less support.
The Bank of Korea’s 0.25 percentage point increase to 1.25 percent brings the rate back to where it was before the pandemic.
The decision was expected by 14 of 19 economists surveyed by Bloomberg.
The rest forecast a hold.
Bond futures fell as the monetary policy statement suggested rate hikes will continue.
The bank said in a statement that it expected inflation to stay
Bank of Korea (BOK) Governor Lee Ju-yeol yesterday said interest rates are still accommodative after two hikes since August, suggesting further tightening is in the pipeline as inflation risks mount in the recovering economy.
The board considered the price pressures building in the economy and financial imbalances when it decided to raise rates by 25 basis points to 1 percent, Lee told a press briefing.
The central bank revised up its inflation outlook to 2.3 percent for this year and 2 percent for next year, expecting price gains would exceed, or at least hover around, its target through next year.
It also forecast