BOE raises rates to 6%; Bank of Korea raises rates today.
The first interest rate increase in Korea since the Crisis in Dec 1997
The Bank of England Raises
Key Rate to 6%, as Expected
Dow Jones Newswires
February 10, 2000
LONDON -- The Bank of England said it has raised its key interest rate to 6% from 5.75%.
The move to raise the official repo rate follows the central bank's monthly monetary committee meeting Wednesday and Thursday, and was in line with market expectations.
A Dow Jones survey of 25 United Kingdom economists last week showed 24 expecting the rate would be raised by 25 basis points.
The central bank didn't publish a statement with the decision, noting only that its latest inflation and output projections will appear in the inflation report to be published on Feb. 17.
The minutes of the meeting will be published Feb. 23, it also said.
With no accompanying statement, economists said that rising housing costs and wage inflation probably pushed the central bank into turning the screw one more time ahead of the February inflation report, due out next week.
"The bank is mostly worried about consumption growth in the U.K., which has been growing above trend." said Danny Gabay, U.K. economist at J.P. Morgan. "There are two legs which are supporting that growth, the housing and labor markets."
"The consumer now has more money because of the strength in the housing and the labor market, and it's the consumers the bank has to tackle," said Mr. Gabay.
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February 10, 2000
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Korea Raises Key Interest Rate
To Stave Off Inflation Increase
Dow Jones Newswires
SEOUL, South Korea -- The Bank of Korea said Thursday it raised its benchmark interest rate by one-quarter percentage point to discourage companies from piling up too much short-term debt and prevent the country's rapid economic revival from sparking an increase in inflation.
The rate increase marks the first time South Korea's central bank has raised short-term rates since the height of the country's currency crisis in December 1997.
The Bank of Korea raised the one-day call rate, which the central bank charges commercial lenders for overnight loans, to 5% from 4.75%.
Most economists hadn't expected the central bank to raise rates this month because inflation still remains fairly muted despite the country's very rapid economic recovery and because of parliamentary elections scheduled for April.
But speculation in the local press had mounted in recent days that the central bank might raise rates, quoting anonymous central bank sources as saying that the gap between short-term and long-term interest rates should be narrowed.
The Bank of Korea said that while the economic recovery has continued, "inflationary pressures remain subdued."
The central bank also said that "given current conditions, there doesn't appear to be a big need for additional rate increases."
The Bank of Korea said that the focus of its increase in the one-day call rate, its benchmark short-term interest rate, "was to narrow the gap between long-term and short-term rates ... thus the call-rate increase wasn't a pre-emptive move but an accommodative one."
The central bank noted that "long-term interest rates had been rising in response to the rapid expansion of the real economy and fears of financial market instability, thus widening the spread between long-term and short-term rates." |
