The Bank of Korea is drawing attention for its impact on the stock market following two consecutive interest rate hikes.
On August 27, the Bank's Monetary Policy Committee held a meeting and raised the benchmark interest rate from 2.75% to 3.00%, an increase of 0.25 percentage points. This follows a previous hike from 2.50% to 2.75% last month. Instances of the Bank raising rates consecutively are rare, and this marks the first time it has done so at the beginning of a rate hike cycle.
The decision was driven by stronger-than-expected economic growth. In the second quarter of this year, the real GDP growth rate was recorded at 0.6% compared to the previous quarter, maintaining positive growth. Consequently, the Bank significantly revised its annual economic growth forecast from 2.6% to 3.3%, and also raised next year's growth rate to 2.9%.
As the Bank accelerates its hawkish stance due to the economic upturn, immediate tension and unease have emerged in the stock market.
Typically, interest rate hikes increase corporate borrowing costs and absorb liquidity from the market, negatively affecting the stock market. The consecutive rate increases have raised concerns about deteriorating performance for struggling companies and have led to a decline in investor sentiment, potentially increasing downward pressure on the KOSPI and KOSDAQ indices.
In response to this news, online communities and stock investors have engaged in heated debates regarding the potential impact on the stock market and the economy.
One user expressed concern, stating, "The KOSPI is dropping sharply because of this," highlighting fears of short-term market declines and weakened investor confidence.
Voices pointing out the struggles of the real economy and small business owners have also grown louder. Many users criticized the government for its contradictory policies, saying, "Only small business owners and those without homes will suffer from high interest rates, while the government distributes consumer coupons and the Bank raises rates, leading to a mismatch in policy that harms the lower classes and struggling companies."
Conversely, some view the Bank's proactive decision to control inflation positively. One user remarked, "If we don't address inflation now, it will explode later," emphasizing the necessity of the rate hike. Another user praised Bank Governor Lee Chang-yong for decisively managing inflation, calling it an unavoidable measure for long-term economic stability.
* This article has been translated by AI.
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