Bank of Korea Rate Rise Hinged on Concerns Over Broad Impact of Inflation

CREDIT INTEREST RATE - SEOUL. A majority of the Bank of Korea's board members expressed concern about import cost-led inflation pushing up wages and goods prices, the central bank's April meeting minutes showed, reinforcing market expectations of another rate hike soon.

On April 14, the bank's monetary policy board voted to raise interest rates by 0.25% to 1.50% to fight inflation, an outcome less than half of economists foresaw in a Reuters poll.

It was the first-ever rate change made without a governor. Board members said after the decision that it was too urgent to wait until the formal confirmation of then-nominee Rhee Chang-yong, who began his four-year term on April 21.

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Inflationary pressures and growing concerns about the broader effects on the economy were behind the rate hike, the meeting minutes released on Tuesday showed.

"Recent upward pressures on wages as well as final goods and services are evidence of such concerns materialising to some extent," one board member said.

Analysts expect the central bank will raise rates to as high as 2% by the end of the year.

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South Korea's consumer inflation jumped far more quickly than forecast and hit a 13-year high of 4.8% in April, government data showed on Tuesday, boosting bond market expectations for more interest rate rises this year.

The Bank of Korea's survey of consumers last week showed South Koreans expect inflation to average around 3.1% over the next 12 months, the highest they have anticipated in nine years.