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Economy

Bank of Korea hikes rate but faces balancing act as economy slows

Central bank on Friday raised key rate to 1.75% in its first move for a year

Fifteen out of 16 economists in a Reuters survey predicted Friday's hike   © Reuters

SEOUL -- The Bank of Korea raised its key rate by 25 basis points to 1.75% on Friday, in a bid to cool down Seoul's overheating housing market and prevent capital flight as the U.S. continues to crank up its benchmark rate.

But Gov. Lee Ju-yeol faces a balancing act. While his seven-member monetary policy board hiked the rate for the first time in a year to stave off a real estate bubble, it is unclear whether the BOK can continue to tighten policy as inflation remains low, growth is slowing and youth unemployment remains high.

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