SEOUL: South Korea’s central bank said Thursday that it saw the need to keep raising the interest rate amid high inflation expectation.
The Bank of Korea (BOK) said in its monetary and credit policy report to the National Assembly that the bank needs to maintain the rate-hike stance for the present on expectations that inflation would stay far above its target.
The central bank hiked its policy rate by 25 basis points to 3.25 percent last month, delivering six back-to-back rate hikes for the first time.
The consumer-price inflation slowed to 5.0 percent in November after peaking at 6.3 percent in July, but it surpassed the BOK’s mid-term inflation target of 2.0 percent for the 20th consecutive month. The BOK said the headline inflation would hover around 5 percent for now although economic downside pressures both at home and abroad would moderately slow the inflation.
The supply-side inflationary pressure was expected to fall amid eased supply-chain disruptions and cheaper global crude oil, while the demand-side inflationary pressure may mount due to the so-called pent-up demand, or the resumption of the delayed consumption caused by the COVID-19 pandemic.
If private consumption weakens faster than expected amid the global economic downturn and the faltering housing market, the demand-side inflationary pressure could also reduce in the foreseeable future, according to the BOK. Xinhua