Bank of Korea keeps rate at 3% after two hikes — Korea Herald

In South Korea, the Bank of Korea kept its benchmark interest rate at 3% on Thursday, October 22, after two consecutive increases. In July and August, the regulator raised the rate by 25 basis points, but decided to pause this month, Korea Herald reports.

Inflation remains above the regulator's target

Inflation remains one of the key factors for the central bank. In September, consumer prices rose by 2.9% year-on-year after 3.1% in August. The figure still exceeds the Bank of Korea's 2% target.

Rising oil prices amid the prolonged conflict in the Middle East are putting additional pressure on prices. On Tuesday, Brent approached $112 per barrel, its highest level in five months.

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Household debt and housing prices

The regulator is also taking into account financial stability risks related to rising housing costs and household debt. Outstanding household loans at the five largest banks had reached 783.59 trillion won as of Thursday. This is 2.76 trillion won more than at the end of September and signals a return to growth after a decline in the previous month.

At the same time, stronger-than-expected economic growth has reduced the urgency of further monetary policy changes. Deputy Prime Minister and Finance Minister Lee Hyeon-il said on October 16 that the country's economy could grow by 3.6% this year, while the Bank of Korea's August forecast projected 3.3%. The current account surplus for the first eight months of the year amounted to $279.2 billion, compared with $69.67 billion a year earlier.