SEOUL: South Korea's central bank raised interest rates in a 4-2 vote in January, with most board members expressing concerns about spreading inflation expectations, meeting minutes released on Wednesday showed. "The rise in oil prices which has been the main driver of recent price growth is largely a result of increased demand following fast growth in emerging economies," one member said while voting to raise interest rates. It was a stark contrast to the general view among South Korean policymakers at that time that supply concerns were mainly to blame for the rising oil prices.
The central bank's monetary policy committee raised the 7 day repurchase agreement rate by 25 basis points to 2.75 percent at the Jan. 13 meeting, while most analysts surveyed by Reuters had predicted a rise in February or March. The Bank of Korea did not name the speakers but said Kang Myung hun, who was recommended to the board by the finance minister, and Lim Seung tae, recommended by the Federation of Korean Banks, voted to keep the rates steady.
Kang and Lim said uncertainty over global economic prospects had not disappeared and that inflation was being led by commodities prices on supply concerns, the minutes showed.
In a rare case, the minutes showed Governor Kim Choong soo voted to raise the rate and provided comments apparently made by him. Kim was a former adviser to President Lee Myung bak and has said he would cooperate with the government policy.
"A cost push (inflation) would eventually turn a demand-pull (inflation)," said the speaker, who was not identified in the minutes but whose manner of speaking made it relatively certain that it was Kim. "(At the moment) I believe raising interest rates will bring about more benefit than harm to the economy," he added. At the following meeting on Feb. 11, the board held the interest rates steady against market expectations for an increase. Minutes from the latest meeting will be released later this month.
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