South Korea’s central bank raised interest rates for the second time this year, fearing higher prices and rising household debt. A quarter percentage point increase in the Central Bank of Korea to 1% is widely expected by economists. The last central bank will take such a step as politicians try to offset the pandemic recovery and rising inflation.
“The Board will continue to pursue a monetary policy to support the recovery of economic growth. And stabilize consumer price inflation at the medium-term target while still paying attention to financial stability,” he continued. The bank also raised its inflation forecast to 2.3% this year and 2% in 2022, indicating further rate hikes.
“The Bank of Korea has made it clear that its top priority is managing financial risk in the face of rising house prices and household debt.
However, recent data shows that both continue to grow strongly,” said Alex Holmes, Asia economist at Capitol.
In August, South Korea became the first prominent Asian economy to raise interest rates since the coronavirus pandemic. It is the country’s first interest rate hike in nearly three years and puts. It at the forefront of a global movement to create a plethora of incentives to reduce the impact of Covid-19 on the economy.
In this way, politics try to offset rising prices and contain growing financial imbalances. The Reserve Bank of New Zealand (RBNZ) raised its key interest rate by a quarter of a percentage point to 0.75%.
In two months, the second spike in the RBNZ rate came as the country saw a decline in unemployment. And inflation, and house prices skyrocketed. It came as the New Zealand government announced. Its plans to reopen borders and allow foreigners into the country next year.
The move eases strict restrictions that have blocked many citizens and tourists since borders were closed at the start of the Covid pandemic.