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May 25, 2022, 9:00 p.m. EDT

Bank of Korea Raises Benchmark Rate, Signals More Tightening

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By Kwanwoo Jun

South Korea's central bank raised its benchmark interest rate Thursday and signaled it would tighten policy further as it keeps up its fight against high inflation.

The Bank of Korea raised its benchmark seven-day repurchase rate by 25 basis points to 1.75% after an increase of the same size at the previous meeting in April.

The fifth rate increase since August 2021 was in line with The Wall Street Journal's survey of 26 analysts, who had mostly projected a quarter-percentage point rate increase.

The bank sharply raised its inflation forecast for this year to indicate more rate increases are coming and trimmed its growth outlook.

The bank now expects inflation will average 4.5% for 2022, more than its February projection of 3.1%. It expects gross domestic product to expand 2.7% this year, compared with its earlier forecast of 3.0% growth.

South Korea's economy expanded 4.0% in 2021.

Surging prices of commodities due to global supply bottlenecks, which are exacerbated by the war in Ukraine, and stimulus policies have contributed to rapid price increases.

Inflation in South Korea hit a 13-year high in April, when the consumer-price index rose 4.8% from a year earlier, well over its 2.0% annual target. South Korea's inflation rate averaged 2.5% in 2021.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com

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