Lates News

Citigroup Group said that with the surge in global oil prices pushing up inflation, the Bank of Korea may raise its policy rate to 3% this year. Citigroup economist Jin-Wook Kim wrote in a report that it is expected the Bank of Korea will raise interest rates twice, each time by 25 basis points, once in July and once in October, bringing the benchmark interest rate close to 3%. These measures, signaling a resumption of the tightening cycle after a long pause, are due to the fact that inflationary pressures have proven to be more persistent than previously expected. Due to disruptions related to the conflict in Iran, Brent crude oil may rise to $110 to $120 per barrel in the near future before falling later this year. This surge in prices - equivalent to a further 20% increase over the next 12 months on top of already high oil prices - will have a greater impact on inflation than on economic growth. The significant asymmetric impact of rising oil prices on inflation will prompt the Bank of Korea to take a more hawkish stance, especially considering the historically loose financial conditions.