South Korea raises interest rate to tame inflation

The Bank of Korea (BOK) raised the borrowing cost to 1.5 percent — its third hike in less than a year — after keeping it at a record low for two years during the coronavirus pandemic.

The latest decision comes as Asia’s fourth-largest economy recovers from a Covid-induced slowdown with a rebound in demand, while struggling with rising fuel and raw material prices.

“Inflation has accelerated while the recovery of the global economy has somewhat moderated, affected by the Ukraine crisis,” the central bank said in a press release.

South Korea’s consumer prices jumped 4.1 percent in March from a year earlier, the fastest pace in more than a decade.

Thursday’s policy meeting had been closely watched as it came after the U.S. Federal Reserve raised its interest rate for the first time since 2018 to tame prices.

The South Korean central bank has hinted at further rate hikes in the coming months to rein in inflation and surging household debt.