First time in six years South Korea raises interest rate
South Korea on Thursday raised its benchmark interest rate for the first time in more than six years, highlighting the country’s robust economic recovery despite increasing threats from nuclear-armed Pyongyang.
The Bank of Korea increased the borrowing cost to 1.5 percent, up from a record low of 1.25 percent and ending 16 months of rate freezes since its last rate cut in June 2016. It was the first time the country’s central bank raised the rate since June 2011 and the first rate hike in Asia since 2014. The hike comes despite mounting concerns over the growing nuclear threat posed by North Korea, which on Wednesday fired an intercontinental ballistic missile that Pyongyang said could strike anywhere on the US mainland.
Last month, the bank raised its growth forecast for this year to 3.0 percent, saying it expects moderate recovery in exports and domestic consumption. The International Monetary Fund also raised its prediction for South Korea’s 2017 GDP growth to 3.2 percent, citing “strong momentum”. “The country’s strong growth outlook means further tightening is likely over the next year,” said Krystal Tan, an economist at Capital Economics. Source: AFP