SEOUL (Reuters) - South Korea’s central bank raised its policy interest rate on Friday for the first time in a year in a widely expected move aimed mainly at containing a boom in parts of the country’s property market.
The Bank of Korea’s monetary policy committee increased the base rate KROCRT=ECI, which applies to its seven-day repurchase agreement deals, by 25 basis points to 1.75 percent, a media official at the central bank said without elaborating.
Governor Lee Ju-yeol is due to hold a news conference starting at 0220 GMT.
Analysts said heightened global markets turmoil over the past few months has made it difficult for the BOK to find the perfect timing to adjust policy.
“Given the global uncertainties that we’ve had of late, I think the central bank chose the best timing,” said Kong Dong-rak, strategist at Daishin Securities, adding that the central bank would likely keep the rate on hold throughout next year.
Market reaction to the widely expected move was modest as investors await further comments from the governor for guidance on future policy direction.
As of 0126 GMT, the Seoul stock market's KOSPI .KS11 was down 0.1 percent on the day while the front-month 3-year treasury bond futures KTBc1 were down 0.03 points.
The decision, tipped by 15 out of 16 economists in a Reuters survey, marked the first tightening in policy since November last year and brought the benchmark rate to its highest level since mid-2015.
Policymakers have been concerned about a property boom in the Seoul area and a surge in consumer finance, prompting various property restrictions.
Still, analysts expect the central bank to stand pat at least throughout next year with the domestic property market already cooling at a time when Asia’s fourth-largest economy is slowing and inflation remains low.
Additional reporting by Yuna Park; Editing by Sam Holmes