South Korea Interest Rate

The Bank of Korea raised its base rate by 25 basis points to 0.75% during its August 2021 meeting, as widely expected, the first-rate hike in near three years and the first major Asian economy to tighten its monetary policy since the pandemic began. Policymakers said the economy is likely to continue its recovery as private consumption is forecast to improve gradually on the expansion of vaccinations and supplementary budget, while exports and investment are expected to sustain their buoyancy. 2021 GDP growth is projected to be around 4%, consistent with the forecast in May. Meantime, 2021 consumer price inflation will increase to the lower-2%, exceeding the May forecast of 1.8%. Core inflation is forecast to run at the lower-1% level. The board said it will gradually adjust the degree of policy accommodation as the economy is expected to continue its sound growth, despite uncertainties over the virus. The central bank has two rate decisions left for this year.