South Korea's central bank reportedly hiked interest rates by half a percentage point and hinted at additional raises in the future as the value of the dollar rose, but there were signals that officials are considering delaying the pace of the increase.
Following a projected quarter-point increase in August, the Bank of Korea (BOK) increased its benchmark policy interest rate to 3%.
Two of the BOK's seven members of the board did, however, vote in favor of a quarter percentage point rise.
Additionally, Governor Rhee Chang-yong addressed the distress caused by rising borrowing expenses for many households.
Following Rhee's remarks regarding BOK board dissenters Shin Sung-hwan and Joo Sang-yong, South Korea's three-year treasury bond contracts saw a big increase.
Rhee stated at a news conference that Joo and Shin voted in favor of a reduced rate increase but didn’t clarify their views.
In a poll, 23 out of 26 analysts projected that the bank would increase interest rates by half-point, while the remaining three predicted a quarter-point increase.
Rhee responded that it was too difficult to say whether South Korea needs another hike in November due to the increased uncertainties surrounding financial markets and global economic expansion.
Yoon Yeo-sam, analyst, Meritz Securities anticipates that the BOK will raise the policy rate to 3.75% in 2023.
The dollar has risen against most other currencies because of the US Federal Reserve's three 0.75 percentage point increases, requiring policymakers throughout the world to assess the possibility of fresh inflationary pressures as well as capital outflows.
The 17% decline in the won this year could cause consumer price increases by making imports more expensive.
Following its policy meeting, the BOK released a statement stating that it expects upside risks to its August inflation outlook for this year of 5.2%, which justifies continuing rate hikes.
The BOK's dovish comments come ahead of the Reserve Bank of Australia's unexpected decision to increase rates by a relatively small 25 basis points boost last week to control inflation without destabilizing the economy.
Source credit: https://www.aljazeera.com/economy/2022/10/12/south-korea-delivers-big-interest-rate-hike-offers-dovish-hints