The Korea Herald


BOK likely to hike key rate: poll

By 신용배

Published : May 11, 2011 - 19:06

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Korea’s central bank is widely expected to resume its tightening move in May by raising the key interest rate by a quarter of a percentage point in a bid to stem inflationary pressure, a poll showed Wednesday.

A total of 14 out of 17 economists forecast that the Bank of Korea will raise the benchmark seven-day repo rate to 3.25 percent on Friday, according to the survey by Yonhap Infomax, the financial news arm of the Yonhap news agency.

The BOK has raised the borrowing costs by a combined 1 percentage point in four steps since July last year in order to contain growing inflationary pressure.

Analysts said although the on-year growth pace of consumer prices has eased, BOK policymakers are likely to raise the key rate as inflation expectations remain high.

“Consumer inflation seemed to peak in April, but the growth rate still hovered above 4 percent. Given that the central bank has reiterated its pledge to focus on price stability, a rate hike is likely to come this month,” said Kong Dong-rak, a fixed-income analyst at Taurus Investment & Securities Co.

In a separate poll, 74.4 percent of 160 bond traders forecast a rate hike for this month, sharply higher than the 11.2 percent prediction made in April.

Consumer prices rose 4.2 percent in April from a year earlier, slowing from a 4.7 percent expansion in March. But consumer inflation surpassed the upper ceiling of the BOK’s 2-4 percent inflation target band for the fourth straight month.

Oil prices sharply fell last week after Osama bin Laden’s death increased worries over retaliatory attacks around the world. South Korea, the world’s fifth-largest crude buyer, relies entirely on imports for its oil needs. 

(Yonhap News)