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South Korea has joined other G20 economies by raising interest rates. The decision marks a gradual return to pre-crisis policies.
The Bank of Korea raised its key interest rate today from a record low, amid prospects of faster growth.
The Bank of Korea lifted the benchmark seven-day repurchase rate to 2.25 percent from 2 percent.
It's the first time the bank's monetary policy committee has increased the rate since August 2008, just before the onset of the worldwide financial meltdown.
Kim Choong-Soo, Governor of Bank of Korea, said, "The Monetary Policy Committee of the Bank of Korea decided today to raise the Base Rate from two percent of its current level to 2.25 percent after examining internal and external financial situations comprehensively."
The Bank of Korea joins others around the world, including Australia, Norway, Canada and Brazil, in increasing borrowing costs.
South Korea has recorded five straight quarters of growth after contracting amid the global downturn. And the expansion is expected to continue accelerating this year.
But in order to let South Korean economy fully recover, a loose monetary policy would continue.
Kim Choong-Soo, Governor of Bank of Korea, said, "Even though we raised interest rates by 25 basis points at this meeting, we will maintain loose a monetary policy in the future."
The rate hike is seen as a signal that the country is ready to start implementing pre-crisis policies. The Bank of Korea lifted the rate one month earlier than expected, and analysts say that's mainly due to concerns about the risk of rising inflation.
- S. Korea central bank raises rates 2010-07-09