Joori and Cynthia Kim

SEOUL (Reuters). South Korea’s central banks raised their benchmark rates to the level they were before Friday’s pandemic. This was in an effort to curb inflation and reduce household debt, as policymakers around the world move to stop consumer price increases.

According to Reuters, 25 of 35 analysts expected the Bank of Korea’s monetary board to raise borrowing costs 25 basis points, to 1.25%. This is the largest increase since March 2020.

South Korea was at the forefront in global stimulus withdrawal, as central banks began to change from their view of faster inflation as temporary results of the pandemic.

Rising inflation is putting more pressure on policy makers. Inflation for 2021 was 2.5%. It’s the highest rate since 2011. This compares to November’s projection of 2.3% by the BOK.

The current tightening cycle is expected to slow in the coming months, according to analysts. Policymakers will assess global growth prospects while countries battle the Omicron virus.

The Federal Reserve indicated its intent to increase rates three times in 2018. This will be watched closely by the global community. Meanwhile, authorities in China are taking measures to ease a slowdown in China’s second-largest economy.

If the economic recovery continues on its current track, Governor Lee Ju-yeol said that a rate increase in the first quarter would be possible.

According to the BOK, growth is expected to be 3% in this year and a slowdown from 4% by 2021.

There are some uncertainties on the policy front for this year. Governor Lee’s term ends March, the month that coincides with the country’s presidential elections.

The decision of President Moon Jae In to name a new Governor before or after the elections is over remains unclear.

Stephen Lee from Meritz Securities, an analyst, stated that “Going forward one more rate increase is likely in the 2nd half after the presidential elections and the BOK restructuring.”

The news conference of Governor Lee will begin at 0220 GMT. This is his second press conference before he resigns in March.

The prime minister also announced that the government will submit a supplementary budget to parliament on Friday. This would bring the total for the 2022 budget to 607.7 trillion won (511.41 billion).

($1 = 1,188.2800 won)