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Bank of Korea Raises Interest Rate to 2.25% to Stem Inflation
Source: koreaherald.com
Source Date: Tuesday, July 13, 2010
Country: Korea (Republic of)
Created: Jul 18, 2010

The Bank of Korea raised its benchmark interest rate for the first time since the global crisis, joining counterparts across Asia in removing monetary stimulus after a strengthening in the region's growth.

Governor Kim Choong Soo boosted the seven-day repurchase rate to 2.25 percent from a record low 2 percent, the bank said in a statement in Seoul today. An increase was forecast by just four of 14 economists surveyed by Bloomberg News, while investors in recent days had added bets on a move.

South Korea joins India, Malaysia and Taiwan in lifting borrowing costs in recent weeks, judging that economic rebounds across Asia will remain resilient to Europe's debt crisis. The decision follows Kim’s assessment that growth may surpass the country's trend rate, and a call by the nation’s government to wait until second-quarter data come later this month.

"When economies are recovering fast, that's the time to raise interest rates, partly to keep it under control but also to signal to people that things are getting better," Jim Walker, managing director and chief economist at Hong Kong-based Asianomics Ltd, said in an interview in Seoul Thursday.

Government bond yields have risen on expectations of a rate move. Yields on one-year securities rose to a five-month high of 3.15 percent yesterday, according to data compiled by the Korea Financial Investment Association. Yields have jumped 38 basis points since the central bank on June 10 signaled a greater emphasis on consumer prices as the economy accelerates.
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