The Central Bank of South Korea raised the rate by 50 bp at once

For the first time in history, the Bank of Korea decided to raise the key rate by 50 basis points at once to combat high inflation. Now the rate is now 2.25% per annum. After the announcement of the regulator's decision, the exchange rate of the South Korean won rose against the US dollar by 0.6%. However, the currency still remains near the lowest in 13 years.

The rate has been increased for the sixth time since August 2021 and the pace of its rise has become the highest since the adoption of the key rates policy by the regulator in 1999. Analysts are confident that the central bank will continue to tighten policy in the coming months.

The chairman of the central bank of the country, Chanyon Ri, said that the non-standard decision on the rate was made unanimously, however, if the inflation curve follows the projected trajectory, further rate increases will be the usual 25 bps. 

Inflation in South Korea in June was 6% in annual terms, which was the highest since November 1998. This year, inflation is expected to exceed the previous forecast of 4.5%. At the same time, the regulator presented a worsened forecast for GDP in 2022: it is expected that the rise will be weaker than 2.7%, which were predicted earlier.