[Anchor]
The Bank of Korea has raised the base interest rate to 2.75% for the first time in three and a half years. The market reacted immediately, with the exchange rate falling, as the central bank hinted at the possibility of further rate hikes. The interest burden is expected to increase for those who have taken out loans to invest in stocks or real estate.
Reporter Min Gyeongho has the story.
[Reporter]
The Bank of Korea's Monetary Policy Board has decided to raise the base rate by 0.25 percentage points to 2.75%.
This marks the end of eight consecutive freezes and the first rate hike in three and a half years since January 2023.
The shift toward monetary tightening is primarily driven by concerns over inflation.
With the consumer price inflation rate soaring to 3.2% last month, the impact of high oil prices due to the war in the Middle East is expected to persist for more than a year.
In addition, the fact that the first-quarter gross domestic income growth rate rose by over 13% due to strong semiconductor exports was also taken into account, as improved income could stimulate domestic demand and further drive up inflation.
The continued growth of household debt and the fact that the exchange rate remains at a high level also served as justifications for the hike.
With economic growth indicators expected to improve significantly, the burden of raising interest rates has been reduced.
[Rhee Chang-yong / Governor of the Bank of Korea: All components of GDP are showing significant strength. (The existing growth forecast for this year) of 2.6% is too low. At the August monetary policy meeting, it will likely be adjusted upward by a considerable margin...]
The Bank of Korea stated that this decision was unanimous among the seven members of the Monetary Policy Board and that it is necessary to continue the trend of interest rate hikes in the future.
The market is raising the possibility of additional hikes within the year, such as in August or October.
The foreign exchange market reacted immediately to the expectation that the interest rate gap with the United States, which has narrowed to 1 percentage point, could shrink further.
The won-dollar exchange rate, which was approaching 1,490 won, began to fall at the same time as Governor Rhee's press conference.
The won showed its greatest strength during these remarks by Governor Rhee, which hinted at further interest rate hikes.
[Rhee Chang-yong / Governor of the Bank of Korea: The upcoming (Monetary Policy Board) meetings will be... what we call live meetings. We are keeping all possibilities open...]
However, the burden on those who have taken on debt to invest in stocks or those who have exhausted their borrowing capacity to buy real estate will inevitably increase along with the higher interest rates.
The interest burden for self-employed individuals is also expected to increase by 1.8 trillion won per year, or 560,000 won per person annually.
Governor Rhee said that regarding concerns over the impact of rate hikes on vulnerable groups, it would be appropriate to supplement this with fiscal or financial policies that can produce selective policy effects.
(Video Editing: Kim Jun-hee)
※
Copying, redistribution, and unauthorized use in AI training are strictly prohibited.