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Unexpected rate hike for South Korea

Unexpected rate hike for South Korea

(13 January 2010 – South Korea) South Korea’s central bank has surprised markets by lifting its key interest rate this week, for the second time in three months, in an effort to control inflation. The Bank of Korea increased its benchmark seven-day repurchase rate from 2.5 percent to 2.75 percent.

Other Asian central banks have also been raising rates and tightening monetary policy, including Thailand whose central bank has now raised interest rates four times in the past six months.

The BOK's monetary policy committee, led by Gov. Kim Choongsoo, said in a statement that it 'expects inflationary pressures to persist and inflation expectations to increase as the economic upswing continues and international commodity prices rise.'

The central bank also noted that property prices were rising in Seoul and the rest of the country.

South Korea, Asia's fourth-largest economy, recovered strongly last year from the global financial crisis and economic slump and is expected to have grown 6.1 percent in 2010 after expanding a mere 0.2 percent the year before.

Growth is expected to slow to a more normal 4.5 percent this year before ticking up to 4.7 percent in 2012, the BOK said last month.
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