ⓒYONHAP News

The Bank of Korea(BOK) has raised its benchmark interest rate by zero-point-25 percentage points to two-and-a-half percent amid concerns over high inflation and its impact on the economy. 

The central bank made the latest rate hike during a monetary committee meeting on Thursday, marking the first occasion it raised the key rate four consecutive times, after taking into consideration the surge in consumer prices and the widening won-dollar exchange rate.

In March of 2020, the BOK slashed its benchmark interest rate by half a percentage point to zero-point-75 percent before cutting it by another quarter of a percentage point two months later amid fears of an economic recession resulting from the COVID-19 pandemic.

It kept that rate steady until August of last year when it hiked the key rate to zero-point-75 percent, the first change in 15 months.

Overall, the BOK raised the key interest rate by a total of two percentage points the past year, including by a quarter percentage point a total of six times and by half a percentage point once.

BOK Governor Rhee Chang-yong announced that the central bank intends to maintain its stance on steadily raising the key interest rate by 25 basis points while focusing monetary policies on fighting inflation.

The governor made the remark in a press conference on Thursday after the central bank raised the key rate.

Rhee said the decision was made after the panel assessed that the current economic situation, including inflation and growth, has not changed much from the July forecast.

He reconfirmed the bank’s intention to continue with 25-basis-point hikes, saying such forward guidance remains effective.

While stating that a big step of a 50-basis-point hike was not being considered, Rhee said market expectations that the BOK will raise the rate to two-point-75 to three percent by the year's end are “reasonable.”

The BOK chief also projected inflationary pressure in the five- to six-percent range to continue through early next year, but said inflation is likely to peak sooner than in the late third quarter or early fourth quarter as previously forecast.