Bank of Korea raises key rate

South Korea’s central bank yesterday raised its key interest rate to 1.25%, its pre-pandemic level, amid growing concerns over inflation.

The decision to lift the benchmark rate by 0.25 percentage point, the third hike in five months, comes amid a sharp rise in housing prices, while low interest rates have caused a surge in household debts.

In March 2020 the Bank of Korea cut the key rate to 0.75% and to a record low of 0.5% in May that year to tackle the economic fallout caused by the coronavirus pandemic.

South Korea’s consumer price index rose 3.7% in December from a year earlier, marking the third straight month it has risen over 3%.

Asia’s fourth-largest economy is recovering on the back of robust exports but a resurgence of virus cases amid the fast spread of the Omicron variant could put a damper on private spending, a report by Yonhap News Agency said.