USD/KRW jumps to 1,170 after BOK hikes key rate by 25bps to 0.75%, first hike since Nov 2018

The Bank of Korea (BOK), the South Korean central bank raised the base rate by 25 bps to 0.75%, marking it the first-rate hike since November 2018.

The BOK became the first major Asian central bank to hike interest rates since the coronavirus pandemic began.

The central bank embarked upon its tightening journey almost after three years to stem the surge in household debt.

Key highlights from the statement summary

Sees 2022 growth at 3.0%.

Sees 2021 growth at 4.0% vs 4.0% before.

S. Korea inflation to run above previous forecast.

Economy to sustain growth.

Exports growth to be sustained.

S. Korea core inflation to run at low-1% range.

Household debt growth accelerated

Build-up of financial imbalances.

Pace of growth and inflation.

To monitor coronovirus spread.

To adjust degree of policy easing as growth, inflation to be sustained.

Market reaction

In an initial reaction to the BOK rate hike, USD/KRW jumped to daily highs of 1,168.07, where it now wavers. The pair is up 0.33% on the day.

FX

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