[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 also help rein in soaring housing prices in the capital area. However, the burden on heavily indebted individuals and corporations is expected to grow heavier.

Reporter Kim Beom-joo has the details.

[Reporter]

The Monetary Policy Board of the Bank of Korea has raised the base rate by 0.25 percentage points to 3%.

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 board has raised the base rate in consecutive meetings.

The decision was heavily influenced by projections that this year's economic growth rate will significantly surpass the original forecast of 2.6% to reach 3.3%, driven by higher-than-expected export volumes and prices of semiconductors.

The bank voiced concerns that if the massive earnings generated from semiconductor exports are fully injected into domestic investment and consumption, it could further stoke stubborn inflation that shows no signs of slowing down.

The Bank of Korea explained that the rate hike was implemented as a preemptive measure to head off such a scenario.

[Shin Hyun-song / Governor, Bank of Korea: There is an expression about fixing a small problem now to avoid a much bigger one later. Responding too late incurs substantial additional costs, and we have decided to tackle this with a proactive approach this time.]

He added that the latest hike would also help curb household lending and, by extension, stabilize housing prices in the greater Seoul area.

The Bank of Korea indicated that it could raise rates one more time within the next six months, which would mean a cumulative 0.75 percentage point increase in the base rate over a short period across three separate hikes.

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

For self-employed individuals who previously paid an average of 17 million won in annual interest per person, the burden will increase by 1.68 million won. Borrowers 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 implement measures such as expanding low-income and livelihood loan programs.

[Shin Hyun-song / Governor, 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 Korean won is necessary to combat inflation, adding that the central bank will play its part.

(Video Editing: Kim Ho-jin, Design: Cho Su-in)