BOK raises policy rate to 1.75%

South Korea’s central bank raised the nation’s benchmark interest rate Friday to 1.75 percent, amid growing household debt and further rate hike signals from the United States.

The Bank of Korea held its last Monetary Policy Board meeting for this year, in which it decided to raise the key interest rate by 25 basis points to 1.75 percent, officials said.

The rate had been frozen at 1.5 percent since November last year, when the BOK made its first hike in more than six years from a record-low 1.25 percent.

In the light of escalating household debt, as well as the widening interest rate gap with Washington, which was seen as triggering a capital outflow, speculation has grown throughout the year that Seoul should inch up the base rate.

Despite such pressure, BOK Gov. Lee Ju-yeol had refrained from the move, citing lower than expected inflation.

But the widely anticipated move from US Federal Reserve to raise its 2-2.25 percent target rate by another 25 basis points next month has weighed down upon Seoul’s monetary policies.

According to a recent survey conducted earlier this week by the Korea Financial Investment Association on 200 market experts, 79 percent of the respondents predicted a rate hike this month.

By Bae Hyun-jung (tellme@heraldcorp.com)