Korea’s Central Bank Raises Rates to 14-Year High

On Friday, the Bank of South Korea announced a 25 basis point increase to the policy interest rate, a move that had been widely anticipated and which many analysts had projected would signal the conclusion of a tightening cycle that had begun in 2021.

After discussion, the Bank of Korea’s seven-member monetary policy board voted to raise the policy interest rate to 3.50%, the highest level since late 2008.

The reaction of the financial markets was mild before the central bank governor’s news conference. Futures on 3-year Treasury bonds were trading 8 points higher than their previous close, and the won was 0.75% stronger versus the dollar.

With Friday’s decision, the current tightening cycle, which began in August 2021, has seen a total increase of 300 basis points.