South Korea's central bank has raised its key interest rate two times in a row for the first time in 15 years.
The Bank of Korea hiked the base rate to one.seven-five percent, up a quarter percentage point amid soaring consumer prices.
The decision was made during the bank's policy meeting on Thursday, in an attempt to rein in the country's inflation, which is nearing five percent.
"The South Korean economy is recovering despite the rise in uncertainty overseas. Because the inflationary pressure is forecast to be much higher than expected and there are risks of financial imbalances, we have decided to raise the base rate by point-2-5 percentage points"
The rate hike comes just one month after the central bank raised the key interest rate by 25 basis points.
This also marks the 5th increase since the BOK slashed its rate to a record low of point-5 percent in May 2020, due to virus woes.
The government has been pursuing a tighter monetary policy since August last year amid growing global inflationary pressure.
Now, the benchmark rate has been set at even higher than the 1.2-5 percent from just before the outbreak of COVID-19.
Thursday's rate decision meeting was the first one presided over by new BOK governor Rhee Chang-yong, who had been signaling rate hikes.
He has been indicating that inflation is the BOK's policy priority.
"As the Bank of Korea sees prolonged high inflation, our monetary policy will be based on taming these high consumer prices."
The bank is seeing faster inflation this year, with inflation rate forecasts of 4.5 percent.
It's the highest in almost 14 years, and up from the previous three.one percent forecast made in February.
This comes as South Korea's consumer prices are seeing the biggest on-year increase since October 2008, during the global financial crisis.
The country's consumer price index last month surged by 4.8 percent from the year before, well above the government's inflation target of two percent.
The Bank of Korea also said, the economy is likely to sustain sound recovery this year, with growth projected at 2.7 percent.
But that figure has seen point-3 percentage points slash from the projection made in February.
The Bank of Korea said the country’s economic growth this year will be led by increased private spending with the lifting of social distancing measures, but it added that due to the sluggish global economy, export growth is likely to slow.
Eum Ji-young, Arirang News.