Rate hike pace important for Korea: Yoon

The toughest challenge facing officials running Korea’s economy is finding the right pace and scale to hike interest rates, Finance Minister Yoon Jeung-hyun said Wednesday. 

Korea, as its economy rebounds strongly and inflation concerns rise, started an exit strategy, rolling back emergency interest rate cuts. 

Last week, the Bank of Korea ended a 16-month rate freeze, raising the borrowing cost for the first time since the global financial crisis. Its policy rate target now stands at 2.25 percent, up 0.25 percentage point from a month earlier. 

With the first move done, officials in Korea are now mulling how to proceed with the normalization of interest rates, in such a way that help stem inflation but does not hurt the economic recovery. Many analysts predict that the central bank will raise rates by an additional 0.5 percentage point by the end of the year. 

“Markets, having anticipated the rate rise, appear to be taking the change well,” Yoon said, referring to last week’s rate increase. He made the remarks during a meeting to discuss steps to stabilize prices. 

“Consumer prices, which critically affect the livelihood of ordinary people, are under growing upward pressure, as the domestic economy picks up and global oil prices rise,” he said. 

Source: OECD