South Korea’s central bank has raised its base rate for the second time in three months as it seeks to curb accelerating inflation and soaring household debt. The Bank of Korea increased its benchmark seven-day repurchase agreements rate by 25 basis points to 1.00% on Thursday. The bank had raised the rate to 0.75% from a record-low 0.50% in August.
All 34 analysts surveyed by The Wall Street Journal ahead of the decision had forecast a rate increase in November. Most analysts expect the bank to raise the rate further next year. The bank has hinted that it may revise its inflation forecast upward, indicating a pressing need to curb price growth. Consumer prices in October hit their highest in nearly a decade and topped the annual 2.0% target for seven consecutive months. The bank is seeking to dial back stimulus brought on by the pandemic as the economic recovery continues on brisk exports and fiscal stimulus. Korean exports expanded for a 12th straight month in October on solid demand for semiconductors and other goods. The bank expects the economy to grow 4.0% in 2021 and 3.0% in 2022. The pandemic-hit economy in 2020 contracted 0.9%.