Bank of Korea Raises Base Rate for Second Consecutive Month to Curb Inflation and Housing Prices

[Anchor]

The Bank of Korea has raised its base interest rate for the second consecutive month, following last month's hike. The central bank explained that this preemptive action was taken before inflation could accelerate further and that it would help stabilize housing prices in the greater Seoul area. However, the burden on debt-laden individuals and businesses is expected to grow heavier.

Reporter Kim Beom-joo has the details.

[Reporter]

The Monetary Policy Committee of the Bank of Korea has raised the base interest rate by 0.25 percentage points to 3 percent.

This marks back-to-back rate hikes for two straight months, following last month's increase.

It is the first time in 3 years and 7 months that the Monetary Policy Committee has raised the base rate in consecutive meetings.

A major factor behind the decision was the projection that this year's economic growth rate will significantly surpass the initial forecast of 2.6 percent to reach 3.3 percent, driven by semiconductor exports selling in greater volumes and at higher prices than expected.

The central bank expressed concern that if the earnings generated from semiconductors are fully injected into domestic investment and consumption, it could further stoke inflation, which is already proving difficult to tame.

The Bank of Korea explained that the rate hike was implemented as a preemptive measure before such a scenario could materialize.

[Shin Hyun-song / Governor, Bank of Korea: There is an expression that says, "A stitch in time saves nine." It means that delayed responses incur additional costs, and we have decided to implement our policy early this time.]

The bank added that this latest hike will also help curb household loans and, by extension, stabilize housing prices in the greater Seoul area.

The Bank of Korea stated that it could raise interest rates once more within the next six months, which would mean a total of three rate hikes amounting to 0.75 percentage points over a short period.

The problem lies with vulnerable businesses and individuals.

For self-employed individuals who previously paid an average of 17 million won in annual interest per person, their financial burden will increase by 1.68 million won, while those with mortgage loans will see their average annual interest swell by 880,000 won.

To cushion the shock, the Bank of Korea suggested that the government should employ measures such as expanding loans tailored for low-income earners.

[Shin Hyun-song / Governor, Bank of Korea: There are many concerns regarding vulnerable borrowers due to this rate hike. We always keep that in mind and are in close communication with the government...]

Bank of Korea Governor Shin Hyun-song also noted that the won-dollar exchange rate remains high and that a stronger won is necessary to help rein in inflation, adding that the central bank will play its part.

(Video editing: Kim Ho-jin, CG: Cho Soo-in)
※ Please note: This article was translated by AI and may contain errors.