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Korean central bank raise interest rate to 2.75 pct.

South Korea's Central Bank unexpectedly raised the

key interest rate by a quarter percentage point on Thursday in a bid to

contain mounting inflationary pressure, Yonhap News Agency reported.

Bank of Korea (BOK) Governor Kim Choong-soo and his fellow policymakers

hiked the benchmark seven-day repo rate, dubbed the base rate to 2.75 percent.

It marked the third rate increase since the onset of the global financial

crisis. The BOK raised the borrowing costs by a quarter percentage point last

July and November from a record-low two percent in an effort to normalize its

loose policy stance and tame inflation.

"Amid rising demand-pull inflationary pressure, the country's consumer

prices will be under mounting upward pressure from the supply side like gains

in prices of raw materials and agricultural products," the BOK said in a

statement carried by Yonhap.

South Korea is grappling with growing inflationary pressure because the

relatively strong economic growth and rising oil and grain prices are exerting

upward pressure on the country's consumer prices, the report said.

The spill-over impacts from China's inflation are also feared to add to

price pressure, it noted.

President Lee Myung-bak has declared a "war" on inflation, and the

government unveiled a set of anti-inflationary measures, including a freeze in

college tuition and public utility charges.

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Publication:Kuwait News Agency (KUNA)
Date:Jan 13, 2011
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