Bank of Korea raises base interest rate to 1%

The era of zero interest rates has come to an end.

The Monetary Policy Committee of the Bank of Korea raised the base rate by 0.25 percentage points from 0.75% to 1% on the 25th. After the base rate hike in August, criticism that banks are taking care of their loan-to-deposit margins has raised the need for speed adjustment, but the hike was forced.

The Monetary Policy Committee has diagnosed that the domestic economy is getting out of the COVID-19 recession. Although facility investment has been adjusted due to global supply disruptions, exports are brisk and private consumption is recovering due to expansion of vaccination and easing of quarantine measures.

Employment has also improved, he said. The Monetary Policy Committee explained that “the employment situation continued to improve, with the number of employed people continuing to increase.” “The recovery of private consumption is expected to intensify while exports and investment continue to flow well,” he said. expected

The Monetary Policy Committee raised the base interest rate by 0.25 percentage points in August from 0.5% to 0.75% for the first time in one year and eight months. It was aimed at relieving risks such as a surge in household debt, but as loan interest rates rose sharply, criticism continued that only financial institutions were boating. The interest burden of citizens who have done so-called ‘youngcheol’ for stock or real estate investment has risen significantly.

The additional interest burden estimated by the Bank of Korea is 5.8 trillion won. In its September financial stability report, the Bank of Korea estimated that a 0.5 percentage point increase in the base rate compared to the end of last year would increase the interest burden by 5.8 trillion won. It was analyzed that the interest burden per borrower would increase from 2.71 million won at the end of last year to 3.01 million won based on the 1% interest rate.

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