Asian economies have been among the strongest performers in recent quarters, and Asian central banks have been among the earliest to raise interest rates this cycle. Bloomberg reports the latest one, this time coming from South Korea.
The Bank of Korea raised its benchmark interest rate for the first time since the global crisis, joining counterparts across Asia in removing monetary stimulus as the region leads world growth. The won climbed.
Governor Kim Choong Soo boosted the seven-day repurchase rate to 2.25 percent from a record low 2 percent, the bank said in a statement in Seoul today. An increase was forecast by just four of 14 economists surveyed by Bloomberg News. Investors are already boosting bets on another move.
The won neared a two-week high as South Korea joined India, Malaysia and Taiwan in lifting rates in recent weeks, judging that Asia’s expansion will remain resilient to Europe’s debt crisis. The decision follows Kim’s assessment that growth may surpass the country’s trend rate, and a call by the government to wait until second-quarter data come later this month.
Sovereign debt woes will prevent the ECB from tightening monetary policy anytime soon, but eurozone economic data in recent days have actually been quite positive. Following Thursday's strong German industrial output data, France and Italy both also reported good industrial production growth on Friday. From Reuters:
In Italy, the euro zone's third largest economy, output rose 1.0 percent from the month before, data showed on Friday, the fifth consecutive gain and easily beating forecasts of a 0.5 percent increase.
That followed even more impressive data from France, where output jumped 1.7 percent, helped by hot weather boosting demand for electricity, and from the euro zone's industrial powerhouse Germany, which on Thursday reported a surge of 2.6 percent.