Tue, 07 Dec 2021

SEOUL, Nov. 25 (Xinhua) -- South Korea's central bank on Thursday raised the benchmark interest rate to 1 percent in a bid to curb inflationary pressure and massive household debts.

Bank of Korea (BOK) Governor Lee Ju-yeol and monetary policy board members decided to increase the seven-day repurchase rate by 25 basis points to 1 percent.

It followed the policy rate hike in August from a record low of 0.50 percent to 0.75 percent.

The rate hike was in line with market expectations. According to a survey of 100 fixed-income experts by the Korea Financial Investment Association (KFIA), 90 percent predicted the rate increase.

Inflationary pressure recently mounted amid the continued record-breaking trend in household debts, encouraging the central bank to tighten monetary policy despite the ongoing COVID-19 pandemic.

Consumer price surged 3.2 percent in October from a year earlier, marking the fastest gain in almost 10 years since January 2012.

The headline inflation topped the BOK's mid-term inflation target of 2 percent for seven straight months to October.

Household credit, which includes debts owed to banks and other financial institutions as well as purchase on credit, hit a new high of 1,844.9 trillion won (1.6 trillion U.S. dollars) at the end of September.

It was up 36.7 trillion won (31 billion U.S. dollars) from three months earlier on the back of the still low borrowing cost.

Recent economic indicators showed positive signs, especially for the domestic economy, amid the higher vaccination rate.

The government eased anti-virus measures in November as the country's full vaccination rate surpassed 70 percent of the total population.

Credit card spending expanded 13.4 percent in October from a year earlier, keeping an upward trend for the ninth consecutive month.

Revenue by department stores and online retailers grew 15.1 percent and 24.5 percent each in October on a yearly basis, while revenue by discount outlets rose 2.9 percent in October after skidding 9.5 percent in September.

Sentiment among consumers over the economic situation improved for the third straight month in November.

The domestic sale of locally-made passenger vehicles tumbled 18.8 percent last month due to the continued supply disruption of chips used to make cars.

The number of jobs increased 652,000 in October from a year earlier, while jobless rate shrank 0.9 percentage points to 2.8 percent in the month.

Despite the positive economic data, concerns remained over the domestic economy amid a recent spike in COVID-19 cases.

In the latest tally, the country reported 3,938 more cases of COVID-19 for the past 24 hours, lifting the total number of infections to 429,002. It marked the country's second-highest daily caseload since the first case was found here in January last year.

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