17 Nov 2010

South Korea raises interest rates

11:46 am on 17 November 2010

South Korea's central bank has raised interest rates to 2.5% from 2.25% following its latest policy meeting. The decision was widely expected.

The Bank of Korea left the rate at a record low 2% for 17 months in response to the economic downturn, before raising it to 2.25% in July.

The BBC reports inflation reached 4.1% in October - with the bank having set a target of 3%.

Rising prices for farm produce lay behind the increased cost of living, the bank said.

It added that such "upward pressures" were expected to continue, with the domestic economy set to remain strong and the costs of raw materials from abroad rising.

South Korea is Asia's fourth largest economy. Latest figures showed growth in the three months to the end of September was only 0.7% compared with 1.4% in the previous quarter.