Bank of Korea raises interest rates, hints they will now be steady

SEOUL — South Korea’s central financial institution raised its coverage interest charge by 25 foundation factors on Friday, as anticipated, however bond yields plunged in response to feedback suggesting its 1-1/2-year rate-hike marketing campaign had ended.

The benchmark 10-year treasury bond yield dived as a lot as 14.3 foundation factors to three.270%, its lowest since late August and much under the Bank of Korea’s coverage charge, which was raised to three.50% on Friday.

The central financial institution mentioned in a press release that financial development this 12 months would fall quick of forecasts issued in November whereas inflation would gradual in keeping with its expectation of two months in the past. It deserted a previously common reference to the necessity for extra interest charge rises.

“The Board will judge whether the Base Rate needs to rise further while thoroughly assessing the economic downside risks and financial stability risks, the effects of the Base Rate raises, the pace of inflation slowdown, and monetary policy changes in major countries,” it mentioned within the assertion.

Economists in a Reuters ballot had predicted Friday’s charge improve would mark the top of the rate-hike cycle, which the Bank of Korea started in August 2021.

“There were more dissenters than expected and the governor’s comments were dovish in general,” mentioned Ahn Jae-kyun, fixed-income analyst at Shinhan Securities.

Bank of Korea Governor Rhee Chang-yong informed a information convention that two of the six board members had voted to carry interest charges steady. Rhee doesn’t vote when a majority is shaped among the many different six.

Gross home product was in all probability decrease within the fourth quarter of 2022 than within the earlier quarter, Mr. Rhee mentioned. That will be the primary fall since mid-2020. Knowledge for October-December has not been issued but.

He mentioned it was untimely to say whether or not the economic system would endure two consecutive quarters of contraction however he hoped development would be higher within the present quarter.

Friday’s resolution marked the tenth rise within the present tightening cycle and introduced the overall quantity of improve to 300 foundation factors. — Reuters

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