Bank of Korea has kept its interest rates unchanged after raising them in June, Bloomberg reported Thursday. This is a likely temporary suspension of the bank’s efforts to tame inflation by increasing borrowing limits.
According to central bank, Governer Kim Choong Soo and his board held the benchmark seven-day repurchase rate at 3.25%.
Bank of Korea has raised rates by a quarter-percentage point each in January, March and June.
As the consumer price rises exceeding its 4% target limit every month this year, the central bank will boost borrowing costs twice more in 2011, Barclays Capital and DBS Bank Ltd predicted.
Central banks of China, Thailand, and India have tightened credit in recent weeks to fight accelerating inflation that’s pushing up living costs.
According to Kong Dong Rak, a fixed-income analyst at Taurus Investment & Securities Co in Seoul said, “The central bank may raise the rate I in August or September. ”
He added, “The European debt crisis and the U.S. economy’s soft patch are keeping it from moving faster.”
Authorities of South Korea are fighting a battle against inflation while at the same time trying to avoid undercutting economic growth amid external uncertainties.
The Bank of Korea has been gradually raising the policy rate as the government has shifted its policy emphasis to reining in prices from pushing growth.