BOK pressed to further raise key rate to track Fed's latest hike

The Bank of Korea may face increasing pressure to raise its key interest rate further following the U.S. Federal Reserve's first rate hike in over three years, according to analysts. On Thursday, the Fed increased its benchmark interest rate by a quarter percentage point to the 3.75-4.00 percent range, signaling potential future hikes due to persistent inflation and high oil prices. This move widened the gap between U.S. and Korean interest rates by up to one percentage point.

The Bank of Korea had already lifted its benchmark rate to 3 percent over two consecutive meetings in July and August, marking the first consecutive rate hikes since January 2023. At that time, the central bank raised the rate at seven consecutive meetings starting in April 2022. Analysts believe that rising inflation, coupled with the rising currency rate and high household debt, will compel the Bank of Korea to further increase its benchmark rate this year.