South Korea happens to be the first developed nation raising the interest rates amid the pandemic
The Bank of Korea soared its policy rate by over 25 basis points to settle the rates at 0.75%
South Korea’s central bank announced the increase of interest rates on Thursday which happens to be unpredictable as financial risks are heating up globally amid the pandemic. The Bank of Korea soared its policy rate by over 25 basis points to settle the rates at 0.75%. It is the first time in over three years that a developed economy has increased their bank interest rates amid the pandemic. Bank of Korea Governor stated that the decision is not unanimous one, and the board members have done the calculations for raising the rates. The decision was not much welcomed by many analysts, with less than 16 of those analysts out of 30 are expecting the hike in rates. One analyst who happens to be the head of Asia FX strategy at RBC Capital Markets, stated the hike to be a grudging rate hike, even though the South Korean market was anticipating a “full string of hikes.”
South Korean index of Kospi registered a fall of about 0.18% following the rate hike statements. In contrast, the Korean won recorded some appreciation. Most of central banks globally have plummeted their rates at record low levels to propel their pandemic-hit economies. From the U.S., Asia and Europe, several governments have started rolling out stimulus measures for supporting corporate businesses. Admittedly, the COVID-19 virus has proven to be a headwind in the road to recovery. According to our World in Data, South Korea has been encountering a huge hike in the number of COVID-19 cases in past few weeks, with its 7-day average rolling daily cases going past 1,800 in comparison to close to 400 back in June. Previous week, the country announced the extension of its social distancing norms and regulations for curbing the cases surge for yet another two weeks, stating that the country may witness further increase in the coming weeks as well.
