South Korea emerges first major Asian economy to raise interest rates

South Korea has emerged the first major Asian economy to raise interest rates since the start of the coronavirus pandemic.

BBC reports that the Bank of Korea boosted its base rate of interest from a record low of 0.5% to 0.75%.

Nexus News learned that the action is intended for helping impede the country’s household debt and home prices, which ascended in recent months.

Central banks around the world are trying to balance the influence of ongoing Covid-19 infections against economic risks such as high inflation.

It is the first time the Bank of Korea has raised its main interest rate for almost three years.

This ruling comes as the central bank tries to balance the country’s economic recovery against the risks of rising debt and inflation.

Policy makers for Asia’s fourth largest economy had been signalling that they were prepared to intensify the cost of borrowing since May.

The move was hampered as the latest Covid-19 outbreak put the country into a partial lockdown last month.

Central banks around the world are preparing to commence dismantling their pandemic-era policies that have seen emergency stimulus measures brought in as economies were shut down to slow the spread of Covid-19.

Most countries that have raised the cost of borrowing so far this year have been in emerging economies that have seen inflation accelerate as demand for goods and services recovered.

In Asia, Sri Lanka last week became the first country in the region to raise interest rates.
Also in the Asia-Pacific region last week, New Zealand was expected to become the first advanced economy to increase rates in the wake of the coronavirus crisis.

But the day before the monetary policy decision was announced, Prime Minister Jacinda Ardern imposed a nationwide lockdown.

The Reserve Bank of New Zealand kept its rate at a record low of 0.25%, saying in a statement “the decision was made in the context of the Government’s imposition of Level 4 COVID restrictions on activity across New Zealand”.


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