As the world’s leading economies recover rapidly from the effects of the corona epidemic, rising inflation has hampered its growth. Not sure if this inflation problem is only for India .. Inflation has increased in all the major economic countries like USA, Korea, UK.
All countries have greatly increased cash flow in the market in order to achieve economic growth. The only way to bring inflation under control in this situation where liquidity is high is to raise interest rates.
South Korea has issued a shocking announcement, saying even large economies such as the United States have been reluctant to make the decision because raising interest rates on corona-stricken economies could have a major impact on countries’ growth.
South Korea
The Central Bank of South Korea has raised interest rates in South Korea, one of the most important economies in the Asian market, realizing that a slowdown in real estate prices and rising household debt will have a significant impact on the country’s growth.
Bank of Korea interest rate
Bank of Korea raised its benchmark interest rate by 0.25 percentage points in a statement yesterday. The benchmark interest rate, which was 0.50 per cent, has now risen to 0.75 per cent with the new hike. South Korea is the first of the leading economies to do so.
US inflation rate
Many problems have arisen as inflation in the United States has risen sharply. The US Federal Reserve has repeatedly tried to control this, but has been reluctant to raise interest rates in view of the country’s growth, investment market growth and the impact on the dollar. But South Korea has risen to the assault.
Delta Corona virus
The Delta Corona virus is spreading rapidly in South Korea. South Korea’s rise in interest rates has drawn sharp criticism from economists, who say it could have a major impact on the country’s trade.
Bank of Korea Interest Rise History
The Bank of Korea, the central bank of South Korea, last raised interest rates in September 2018, following a single interest rate. It cut interest rates to 0.50 per cent in May 2020 to offset the impact of the corona infection. The Central Bank of South Korea has raised interest rates after almost 3 years.
4 percent economic growth
South Korea is projected to record about 4 percent economic growth this year, while delta-type corona infections are high. The country’s export trade is expected to benefit South Korea’s economic growth, as global demand for electronics increases.
Rising real estate prices
Home prices in South Korea rose by about 14.3 percent in July compared to the same month last year. This is the biggest rise since 2002. It has raised interest rates as it continues to become a major problem for even ordinary people to live on.
The amount of debt of households
Similarly, the debt level of South Korean households has increased by about 10.3 percent compared to last year. According to the Bank of Korea, the country’s economy could get worse if left unchecked.
Demand for electronics equipment
Similarly, economists say that South Korea has raised interest rates on account of demand and trade in electronics during the lockdown period, which will not last long. The United States is also expected to raise interest rates soon due to South Korea’s action.
Investing in chip production
But South Korea has invested heavily in chip production. It hopes to offset this trade decline. Similarly, South Korea’s growing automobile trade, not only in that country, but around the world, is seen as the main reason for the rise in interest rates.