SKorean central bank raises rate to 2.5 percent

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SEOUL, South Korea (AP) -- South Korea's central bank raised its key interest rate Tuesday for the second time in four months amid persistent concerns about inflation.


The Bank of Korea announced that it lifted the benchmark seven-day repurchase rate to 2.5 percent from 2.25 percent at a monthly monetary policy meeting.

The decision was widely expected. A total of 11 economists at 13 financial institutions surveyed by Yonhap Infomax, the financial news arm of Yonhap news agency, predicted the bank would increase the rate to 2.5 percent.

The central bank surprised economists last month by keeping the borrowing cost unchanged as concern about potential exchange rate risks to the global economy offset worries about domestic inflation.

Still, the central bank warned last month that "upward pressures" on prices were unlikely to abate. Indeed, the country's consumer price index for October, announced earlier this month, rose 4.1 percent from the same month last year.

Beginning in late 2008, the Bank of Korea steadily cut its interest rate to a record low 2 percent to combat the effects of the global financial crisis and ensuing economic downturn. It raised the borrowing cost to 2.25 percent in July amid solid growth prospects for the domestic economy and budding inflation worries.

Tuesday's rate decision also comes as South Korea's economic expansion has weakened. Growth in the three months ended Sept. 30 slowed to a rate of 0.7 percent from 1.4 percent in the previous three months. It was the second straight quarter of slower growth in Asia's fourth-largest economy.