Signage for Bank of Korea is Displayed on Central Bank’s Headquarters Building
The Bank of Korea hiked interest rates for a second consecutive meeting on Thursday to combat consumer inflation at 13-year highs. The central bank also raised its projections for prices to rise to their highest since 2008. The decision was made following an emergency board meeting, which started at 9 a.m. local time.
To stabilize the financial and foreign exchange markets, the Bank of Korea announced it would boost short-term liquidity and deploy measures as needed. It also made special loans available to inject funds into the market if necessary. The central bank reiterated a pledge to provide sufficient liquidity for a limited time until the financial and foreign exchange markets stabilize.
South Korean President Yoon Suk Yeol lifted a surprise martial law declaration overnight, but it was later overturned by the National Assembly. Yoon announced the emergency order was being lifted, and military units deployed earlier were withdrawn.
Market watchers believe the negative impact on the economy and financial market could be short-lived, with uncertainties on the political and economic environment likely to be mitigated through proactive policy responses. Citi analysts noted that the Korean stock market experienced significant fluctuations in the US on Tuesday amid political turmoil in Korea, with the iShares MSCI South Korea ETF (EWY) falling as much as 7% to a 52-week low before closing 1.6% lower.
Despite the turmoil, South Korean stock markets opened as usual at 9 a.m. KST, with the Bank of Korea’s next move under close scrutiny. Last week, the BOK cut its benchmark interest rate by 25 basis points in a surprise move.