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South Korea’s central bank has raised the benchmark interest rate by 25 basis points to 3.50%, as expected.
The Bank of Korea raised the seven-day repurchase rate for a seventh straight time to fight inflation, which has recently eased but still remained high.
Seventeen out of 21 analysts surveyed by The Wall Street Journal before the rate decision had forecast a quarter-percentage-point rate increase. The remaining four had expected the bank to stand pat, calling for the policy tightening either to ease or stop, as the economy is losing steam and inflation is moderating in the country.
Exports remained weak during the early weeks of January after shrinking for a third straight month in December on sluggish global demand for memory chips and other Korean goods. The country posted its first annual trade deficit in 14 years in 2022.
Inflation moderated to 5.0% in December from the latest peak of 6.3% in July, averaging 5.1% for 2022.
The central bank expects inflation to top 5%–well above its annual 2% target–in the coming months before gradually easing later to average 3.6% for 2023.
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