South Korea Freezes Key Rate Despite Inflation Fears

SEOUL: South Korea’s central bank left its key interest rate unchanged on Friday despite official concerns about inflation.

Bank of Korea governor Kim Choong-Soo and his fellow policymakers froze the benchmark seven-day repo rate at 2.75 per cent, following a 25 basis points rise in January.

Analysts said the bank may want to assess the effect of the January rise.

They said the current rise in consumer prices was mainly driven by the supply side, which indicated that a rate rise might have limited effect.

“For now, the cost-push inflationary pressure seems to outweigh the demand-pull one,” Kim Dong-Hwan, an analyst at HI Investment and Securities, told Yonhap news agency.

“And given that a rate hike has far-reaching impact on the economy, a back-to-back rate increase would seem to be burdensome.”

Annual inflation reached 4.1 per cent in January, topping the central bank’s target band.

The finance ministry last month announced a series of measures to curb price rises, including a tariff cut on key imports and a pledge to freeze utility charges.

Source – AFP/fa

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