Bank of Korea on Track for Rate Hike as Virus Hit Downplayed

Bank of Korea Governor Lee Ju-yeol said the central bank will discuss raising its key interest rate from its next meeting in August after playing down the likelihood that the latest virus surge will dent the economy’s recovery, Bloomberg News reported. While the bank left rates unchanged at 0.5% at its policy meeting on Thursday, a call for a quarter percentage point hike from one member helped send Korea bond futures plunging and strengthened the won as investors boosted their hawkish bets for the BOK to move early. “The need to deal with the issue of financial imbalances through the normalization of monetary policy has become greater than before,” Lee said at a press briefing following the decision. A potential hike in August would still depend on Covid-19 developments, he added. The comments showed that a surge in Covid-19 cases hasn’t pushed the BOK off track from normalizing policy this year. That’s because Lee sees the economy’s rapid recovery largely withstanding the latest round of restrictions as the government tries to rein in rising infection numbers and prepares an extra budget. Governor Lee added that while there was no timetable for raising rates, there was no need to delay a move if the economy’s recovery remains steady. Read more.
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