Base rate hiked 50 bps to 2.25 Reuters poll 2.25
Most analysts see rate at 2.75 by year end
BOK expects 2022 GDP growth to lag earlier projection

SEOUL, July 13 Reuters South Korea39;s central bank raised its policy interest rate by an unprecedented half point on Wednesday, aiming to pull inflation from 24year highs while balancing fear of a sharp economic downturn as business activity flounders.

Though 6 inflation prompted calls for action, a policy rate widely seen peaking by yearend at 2.75 five times higher than at the onset of the COVID19 pandemic over two years ago would pile pressure on the world39;s most indebted consumers who are also contending with mortgage rates at nineyear highs.

The Bank of Korea BOK raised its benchmark interest rate by 50 basis points to 2.25, the biggest increase since the bank adopted the current policy system in 1999, and coming even as it expects gross domestic product growth below the May forecast of 2.7.

Twentyseven of 32 analysts in a Reuters poll expected the bank to announce a halfpoint hike, while the remainder expected a quarterpoint.

Considering inflation and economic conditions, though economic downside risk is indeed high, uncertainties remain elevated, and thus the Board sees it as important at this time to curb the spread of inflation expectations through a 50basispoint rate hike to prevent acceleration of inflation, the BOK said in a statement.

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