Bank of Korea raises interest rate by 25 basis points to 3%

By Toni Weeks

San Diego, March 10 - The Bank of Korea's Monetary Policy Committee increased the Base rate by 25 basis points to 3% at its meeting on Thursday, according to a release issued by the bank. The committee last raised the interest rate to 2¾% in January.

The committee assessed Korea's domestic economy, saying it has maintained its upward trend due to the strong growth of exports, increased domestic demand and improved labor market conditions.

Looking forward, the committee forecasts continued improvement in the domestic economy in spite of the presence of external risks, the release noted.

Consumer price inflation rose to 4.5% in February, driven by higher petroleum, agricultural and personal services prices. The committee speculated that the rising inflation trend may persist because of demand pressures from the economic upswing, instability of international commodity prices and elevated inflation expectations. Housing prices and leasehold deposits have both continued an upward trend.

In the financial markets, volatilities of stock prices and long-term market interest rates have increased due to external risk factors and the steep uptrend in prices.

Emerging market economies have continued to improve, while the major advanced economies have kept up their paces of recovery and should continue to do so, the committee said.

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