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June 10, 2011    

South Korea lifts rates to combat inflation

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by Kay Murchie

South Korea’s central bank has today elected to lift interest rates in order tame high inflation.

The move surprised analysts after the bank held interest rates last month and inflation fell to 4.1% in May, after reaching a 29-month high of 4.7% in March.

Inflation remains at the higher end of the central bank’s 2%-4% target.

Inflationary pressures are rife in Asia and many central banks have opted to hike interest rates in an attempt to combat rising prices.

The Bank of Korea (BOK) lifted interest rates from 3% to 3.25% and the move was not expected after markets believed the bank’s priority to be boosting growth, rather than dealing with price rises.

Consumer prices are likely to sustain their strong upward trend, due mainly to the economic growth and high oil prices,” the BOK said in a statement.

The interest rate rise was the third this year.

Yesterday, the Bank of England and the European Central Bank both opted to keep interest rates at 0.5% and 1.25% respectively, despite higher inflation.

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