"Controlling Inflation and Housing Prices": Base Rate Raised for Second Consecutive Month

[Anchor]

The Bank of Korea has raised the benchmark interest rate once again, following last month's hike. The central bank explained that this preemptive move was taken before inflation could surge further, and that it would also help rein in soaring housing prices in the greater Seoul area. However, individuals and companies burdened with heavy debt are expected to face even greater financial pressure.

Reporter Kim Beom-joo has the details.

[Reporter]

The Monetary Policy Board 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 consecutive months, following last month's increase.

It has been 3 years and 7 months since the Monetary Policy Board last raised the base rate in consecutive meetings.

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

The central bank voiced concerns that if the massive revenue generated from semiconductors is fully injected into domestic investment and consumption, it could further stimulate inflation, which is already showing no signs of subsiding.

The Bank of Korea explained that the rate hike was implemented as a preemptive measure to address the issue before such a scenario unfolds.

[Shin Hyun-song / Governor of the Bank of Korea: There is a saying that a stitch in time saves nine. It means that reacting too late incurs a corresponding extra cost, and we have decided to take a proactive policy approach this time.]

The bank added that this latest increase will also help curb household loans and ultimately assist in stabilizing housing prices in the Seoul metropolitan area.

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

The problem lies with companies and individuals pushed to their limits.

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

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

[Shin Hyun-song / Governor of the Bank of Korea: There are widespread 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 tame inflation, adding that the central bank will fulfill its role in achieving this.

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