Business & Economy

Bank of Korea aims for first post-pandemic rate hike this year

Seoul, Jun 24 (EFE).- The governor of the Bank of Korea, Lee Ju-yeol, said Thursday that the entity is ready to execute its first post-pandemic interest rate hike this year, according to the recovery of the South Korean economy.

This is Lee’s first mention of a time frame for the increase, although he had previously referred to a cut in the easing measures adopted by the South Korean central bank to alleviate the impact of the Covid-19 pandemic.

“There is a need to normalize monetary policy this year,” the bank’s governor told the media, in statements collected by the Yonhap news agency.

Lee believes there is a growing need to tighten monetary policy as financial imbalances have worsened.

The bank said Thursday it expects the consumer price index (CPI) to remain at about 2 percent in the second half of 2021, and projects that the country’s core inflation, which excludes food and energy prices by its volatility, exceeds 1 percent.

The entity expects inflation in South Korea to expand further, in line with the improvement in the national economy.

He also warned that international commodity prices and the spread of Covid-19 pose risks.

South Korea’s central bank raised its 2021 growth forecast sharply to 4 percent in May, while keeping its benchmark rates unchanged at a record low of 0.5 percent as exports rebounded sharply.

It also raised its inflation forecast to 1.8 percent, from the previous forecast of 1.3 percent.

South Korea’s CPI rose 2.6 percent in May, its highest year-on-year increase since April 2012 (when it increased by the same percentage), and above April’s rise of 2.3 percent. EFE


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