People walk along a commercial street in Seoul on February 24, 2021.

Ed Jones | AFP | Getty Images

South Korea’s central bank raised interest rates on Thursday, in a decision that was expected as financial risks heat up despite the virus threat.

The Bank of Korea raised its policy rate by 25 basis points to 0.75%, becoming the first developed economy to hike rates in the pandemic era.

Out of 30 analysts polled by Reuters, 16 expected the rate hike.

South Korea’s benchmark index Kospi fell 0.18% following the announcement. The Korean won strengthened slightly.

Most central banks globally have slashed rates to record lows in a bid to prop up their pandemic-hit economies. From the U.S. to Europe and Asia, governments around the world have been rolling out stimulus measures to support businesses. 

“Admittedly, the virus remains a headwind to the recovery,” Capital Economics said in a note following the announcement.

South Korea has been…

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