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BOK Gov. Rhee Chang-yong presides over a meeting of the bank’s Monetary Policy Board on May 26. (pool photo)

The Bank of Korea raised its benchmark interest rate by 0.25 percentage points on Thursday, from 1.5% to 1.75%.

The real economic growth forecast for this year was lowered to 2.7% while the inflation outlook was bumped up to 4.5%.

“For the time being, monetary policy will focus on inflation [rather than economic growth],” the Monetary Policy Board said. It is highly likely that the base rate will be raised further in July and August and possibly reach 2.5% by the end of the year.

During the Monetary Policy Board meeting, which recently appointed BOK Governor Rhee Chang-yong presided over for the first time, the standard interest rate was raised by 0.25 percentage points to 1.75% a year after it was raised by the same percentage points in April.

All seven board members unanimously agreed to the decision. The BOK did not take a big-step rate hike of 0.5 percentage points.

Since it was raised by 0.25 percentage points last August for the first time since the onset of the COVID-19 pandemic, the standard interest rate has been increased at an unprecedentedly fast rate, adjusted five times over a period of nine months.

The standard interest rate has reached 1.75% for the first time since November of 2018.

During a press conference held immediately after the board’s meeting, Rhee stated, “Today’s decision to raise the policy interest rate is a preemptive response to concerns about the negative impact of inflation in our economy rather than a decision concerned with economic growth.”

By Cho Kye-wan, senior staff writer

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