SOUTH Korea’s central bank today delivered a historic half-point interest rate hike to tame fast-growing inflation, particularly soaring energy costs linked to the war in Ukraine.

The Bank of Korea (BOK) raised its benchmark policy rate by 50 basis points to 2.25%, it said in a tweet, the largest increase since its current framework was implemented in 1999.

The decision comes as Asia’s fourth-biggest economy recovers from a Covid-induced slowdown while struggling with rising fuel and raw material prices.

Last month, the country’s consumer price index jumped 6% on-year, hitting its highest point since the Asian financial crisis more than two decades ago.

While South Korea’s exports remain a major driver of economic growth, the country posted a trade deficit for the second consecutive month in May as a result of rising import costs, according to government data.

Central banks around the world have launched a series of rate increases as Russia’s war in Ukraine has fuelled a surge in energy and food prices that has driven up inflation.

The BOK reduced its 2022 growth forecast to 2.7% in May, down from 3% three months earlier. – AFP, July 13, 2022.