By Agency Reporter

Wednesday, 17 Nov 2010

South Korea‘s central bank has raised interest rates to 2.5 per cent from 2.25 per cent, following its latest policy meeting.

British Broadcasting Corporation reported on Tuesday that the decision was widely expected, with most economists having forecast an interest rate rise in October.

The Bank of Korea had left the rate at a record low two per cent, for 17 months in response to the economic downturn, before raising it to 2.25 per cent in July.

Observers said accelerating inflation had overridden concerns about waning global growth.

Inflation hit 4.1 per cent in October, with the bank having set a target of three per cent. Rising prices for farm produce lay behind the increased cost of living, the bank said.

It added that such upward pressures were expected to continue, with the domestic economy set to remain strong and the costs of raw materials from abroad rising.

Source: Punch