South Korea’s interest rate has raised to the level it was before the global pandemic, aiming to curb high inflation and rising household debts.
According to the Bank of Korea's (BOK), the plan to increase the rate to 1.25% was the third time within six months. This is while central banks across the world strive to lower the effects of the pandemic on inflation.
South Korea was the first Asian country to increase the rates in August. With the rise in consumer inflation reaching 2.5% in 2021, the highest price increase since 2011, the country’s policy makers are pressed to take actions.
To curb the negative consequences due to the Covid-19, global central banks and governments have added trillions of dollars to the world’s economy in the last two years. International policy makers are currently trying to remove emergent stimulus packages.
South Korea, in the front line to switch to unwind the huge economic stimulus, tries to control high consumer prices. In the same front, the United States of America also aims to grow its interest rate three times in 2022. Prices in the U.S. have seen the fastest pace for nearly 40 years; inflation has increased up 7% year-over-year last month.
To address rising prices, the Bank of England, too, increased interest rates in December for the first time within over three years.