50 basis points in history!South Korea starts the wave of continuous interest rate hikes, and the difficulty of economic recovery has increased

21st Century Business Herald reporter Hu Huiyin reported

Faced with increasingly soaring inflation pressure, the Central Bank of Korea showed unprecedented radicals.

On July 13, the Bank of South Korea announced that it had a decision to raise interest rates for the first time in history, raising the benchmark interest rate from 1.75%to 2.25%. It is reported that since 1999, interest rates have been used as the main policy tools, the Central Bank of Korea has never had a decision of 50 basis points in interest rate hikes.

For the first time, the Bank of South Korea's central bank was so aggressive to raise interest rates, the fundamental purpose was to "resist inflation". Data released by the South Korean government showed that the country's consumer price index in June increased by 6%year -on -year, the highest level in nearly 24 years.

Yang Panpan, deputy director of the International Financial Research Office of the World Economic and Political Research Institute of the Chinese Academy of Social Sciences, said in an interview with the 21st Century Business Herald that 50 basis points in South Korea's interest rate hikes meet market expectations, mainly to control the rapid rise in domestic inflation; in addition, As the Fed's recent tightening of monetary policy has increased, the market also generally believes that the probability of the Fed's 75 -basis point in July in July is a high probability. This is also an important consideration for the 50 basis points of the Bank of Korea to raise interest rates.

At the same time, Li Changzhang, the governor of the central bank of South Korea, said that the interest rate of 2.75%-3%before the end of the year is reasonable. It is advisable to gradually raise interest rates in the future. Key interest rates may be at the lower end of neutral interest rates. All signs show that subsequent South Korea will continue to raise interest rates.

Just when the wave of interest rate hikes was opened, South Korea was also facing the decline in export growth. As an export -oriented economy, how should South Korea seek balance in "anti -inflation" and "stable economy"?

Is the strength of 50 basis points in interest rate hikes?

At the interest rate resolution meeting, the Bank of Korea took the first measure of 50 basis points to raise interest rates to raise the benchmark interest rate from 1.75%to 2.25%. Although the interest rate hike is unprecedented, from the perspective of the outside world, the decision -making of the Bank of Korea has already been expected.

Data show that the consumer price index in June in South Korea rose 6%year -on -year, higher than the 5.4%increase of last month. The goal of 2%of the central bank.

Inflation pressure has penetrated into various fields related to the people's livelihood. Recently, the survey released by the Korean Consumer Group Agreement showed that compared with the same period last year, there were 33 of the 35 major necessities in South Korea in the second quarter, including flour, edible oil, sesame oil and other foods, with an average increase rate of 9.9% Essence The consumer group also said that due to problems such as high oil prices and unstable supply and demand of raw materials, domestic prices may rise to a long time.

South Korea's inflation has not been seen, and the cost pressure from this is not only transmitted to consumers, but also reflected at the corporate level. At present, the phenomenon of "salary -price" spiral rising has appeared. A report issued by the Korean Institute of Economic Research showed that the average annual salary of South Korean workers rose from US $ 29,238 in 2000 to US $ 4,1960 (about RMB 280,000) in 2020, an increase of 43.5%. In addition to labor costs, Korean companies are also facing pressure on raw material costs and rising energy prices.

This year is the third time the Bank of Korea has raised interest rates for the third time, and this is also the sixth rate hike since August 2021. Wang Xinjie, the chief investment strategyist of Standard Chartered China Wealth Management Department, told the 21st Century Business Herald reporter: "The continuous rise in domestic inflation expectations in Korea may push up the price of goods and services and further exacerbate inflation. The 25 basis points may be difficult to stabilize the price, so there are 50 basis interest rate hikes. The rhythm of the country's interest rate hike is also consistent with the pace of the Federal Reserve. "Although 50 basis points have been raised, Wang Xinjie believes that it is expected that in the future several few in the future The increase in CPI in South Korea will remain above 6%.

In fact, South Korea's "violence" raised 50 basis points, and also considered the problem of spreads between the Korean won and the US dollar. Since the beginning of this year, the exchange rate against the US dollar has fallen by 9.7%, becoming one of the worst currencies in emerging markets.

Wang Xinjie said that before the interest rate interest meeting, some institutions predict that the Bank of Korea will maintain a rate hike of 25 basis points, but if the Federal Reserve raises more than 50 basis points, the currency spread in South Korea and the United States will further expand, resulting in investors' financial finance. In addition, if the spread is further expanded, the Korean won may be further depreciated, and the weakness of the Korean won may continue to increase the risk of input inflation.

After the central bank announced the resolution of interest rate hikes, the exchange rate against the US dollar was slightly recovered. As of 19:00 on July 13, the exchange rate of the Han Dynasty rose 0.15%to the US dollar. However, for the subsequent trend of Han Yu, Yang Panpan believes that it is not too optimistic. "The current US dollar is very strong, and the exchange rate against the euro has reached a flat state. After that, Han won may not continue to strengthen because of interest rate hikes."

The continuous interest rate hike opening the economic recovery is still slow

In order to resist inflation, the Central Bank of Korea "gritted teeth" to raise interest rates 50 basis points, but this is far from the end. South Korea's central bank governor also hinted that he may continue to raise interest rates later and keep interest rates at 2.75%-3%before the end of the year.

However, continuous interest rate hikes are likely to affect the process of South Korea's economic recovery.

According to a survey released by the Central Bank of Korea, South Korea ’s Bank of Korea’ s at the end of June, concerns about the high price of raw materials and the global economic downturn, the South Korean corporate confidence index has declined. In addition, interest rate hikes are not conducive to the improvement of national consumption. Wang Xinjie told reporters that after interest rate hikes, it will inevitably affect the consumption expenditure of residents, especially with such high price factors. Increased living costs will reduce disposable income, which is not conducive to the recovery of consumer demand. In addition, South Korea's export performance is often regarded as the "barometer" of global trade. Therefore, frequent fluctuations in South Korea have attracted much attention from the recent exports of South Korea.

Preliminary data released by the Ministry of Commerce Resources of South Korea on Friday shows that South Korea's exports increased by 5.4%year -on -year in June to 57.73 billion US dollars, a significant slowdown over the year -on -year growth of 21.3%. Recently, the International Institute of Trade and Commerce under the South Korean Trade Association also predicts that this year South Korea's trade revenue and expenditure will change from a surplus to the deficit after 14 years, and the deficit scale will reach a new high since 1996. Obviously, in the past, South Korea's strategy of relying on currency depreciation to enhance export competitiveness has no longer worked.

Wang Xinjie told reporters, "South Korea is a typical industrial producer, but it is mainly based on high -tech products processing. In the past two years, the price increase of raw materials and the depreciation of the Korean won, and the domestic production costs in South Korea have increased significantly. However, Korean companies have increased. The production cost cannot be effectively passed on to the demander, because this may reduce market share, and the factors of slowing overseas demand are superimposed. Depreciation of the won does not mean that it can boost exports. "

In addition, in the view of Yang Panpan, South Korea's exports declined year -on -year and involved the types of South Korea's export products. She believes that South Korea's exports depend on communication technology (ICT), semiconductor and other industries, and are recently entering the downward cycle, so South Korea's exports will be affected.

Due to the decline in export momentum, the Ministry of Planning of the South Korean planning of the Ministry of Planning has reduced its economic forecasts. It is expected to increase by 2.6%in 2022, and the growth rate is slower than the expected 3.1%in December last year. In addition, the Economic Cooperation and Development Organization (OECD) has also lowered its predictions on South Korea's economy. It is expected that the country's economic growth rate in 2022 will be 2.7%, which is 0.3 percentage points from earlier forecasts. In this regard, Wang Xinjie told reporters that for countries such as South Korea with high export dependence, the follow -up economic growth momentum depends on cost and demand, "South Korea's manufacturing output and export growth depends on global demand recovery. When the foreign demand market, the foreign demand market With recovery, South Korea's economic momentum will have a chance to recover. "

Although the economic recovery uncertainty has increased, the Central Bank of Korea still takes "anti -inflation" as the primary task. South Korea's central bank governor, Li Changzheng, said that because South Korea's inflation is low, it is not necessary to raise interest rates as much as the Federal Reserve. It is advisable to gradually raise interest rates by 25 basis points in the future. But in fact, the subsequent interest rate hike may also have to look at the effect of South Korea's inflation. Wang Xinjie also believes that whether the inflation can control the inflation depends on a number of factors. "It depends on the geographical situation, the recovery of the supply chain and the stability of overseas demand, which can be completed by the interest rate hike of a single country."

Obviously, South Korea will have to stabilize the increasingly high inflation in order to truly start the process of economic recovery.

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