The inflation rate hits a 24-yr high in South Korea

The inflation rate hits a 24-yr high in South Korea. 

The inflation rate in South Korea in June increased at its quickest rate since the Asian financial crisis. 

It is raising hopes that the central bank may introduce a 50 basis point rate increase next week to lower prices and stop capital flight.

According to official statistics released on Tuesday, the consumer price index (CPI) increased by 6.0 percent in June relative to a year earlier, which was the fastest increase since November 1998 and beyond the central bank’s 2 percent objective for the fifteenth consecutive month.

The CPI increased faster than expected, surpassing the 5.9 percent predicted in a Reuters survey, from a gain of 5.4 percent the previous month.

Before the Bank of Korea’s next rate decision on July 13, Governor Rhee Chang-Yong said he would maintain the option of a potential 50 basis point rise open while monitoring critical economic indicators. View More

If implemented, it would be the first time in the central bank’s history to raise interest rates by half a percentage point.

BOK deputy governor Lee Hwan-Seok stated the bank “has to be especially attentive against the further strengthening of inflationary expectations” in a meeting conducted following the announcement of the inflation statistics. 

He also said that present inflation patterns would persist for the time being.

Three-year Treasury bond futures for September increased by 0.15 points, while 10-year bond futures increased by 0.09 points. The win was slightly higher, and the Kospi was up 1.77 percent at 2,341.08.

The BOK joined a worldwide wave of policy tightening as central banks struggle with price surges not seen in decades by delivering five 25-basis-point interest rate increases since late August, raising rates to 1.75 percent, the highest since mid-2019. View More

After the U.S. Federal Reserve increased its rate by 75 basis points in June, there has been an increase in the likelihood of a 50 basis point increase.

According to many market observers, the BOK would aim to limit the rate differential between South Korea and the U.S. to prevent any capital outflows.