[Weekly Photo] Base Interest Rate at 3%, When Will the Common People's Burden Ease?

On the morning of the 12th, a merchant is preparing for business at Gwangjang Market in Jongno-gu, Seoul. Photo by Yonhap News

For the first time in 10 years since October 2012, the base interest rate has entered the 3% era. The Monetary Policy Committee of the Bank of Korea decided on the 12th to raise the base rate of 2.50% by 0.50 percentage points in one go, a so-called "big step" increase.

This move aims to stabilize inflation and reduce the interest rate gap with the United States. According to Statistics Korea, the consumer price index has recorded over 5% for two consecutive months. At a press conference, Lee Chang-yong, Governor of the Bank of Korea, stated that if the inflation rate remains in the 5% range, the policy of raising interest rates will continue regardless of whether the cause is demand, supply, or sacrificing economic growth. The U.S. Federal Reserve is not slowing down its monetary tightening. It is expected to implement a fourth consecutive giant step (0.75 percentage point hike) early next month. Since the rising exchange rate affects import prices and can push up overall domestic inflation, the Bank of Korea sees narrowing the interest rate gap as aligning with its policy goals of price and financial stability.

With the steep interest rate hikes, dark clouds of economic recession are thickening, and the pain for households and businesses is expected to grow. We have gathered related photos including scenes from the Bank of Korea’s Monetary Policy Committee meeting, interest rate notices posted on the exterior walls of commercial banks, used kitchenware piled up in Hwanghak-dong Kitchen Street amid economic hardship, busy traders at the New York Stock Exchange, and small business owners burdened by big step interest rates.

Bank of Korea Governor Lee Chang-yong is striking the gavel at the Monetary Policy Committee regular meeting held at the Bank of Korea in Jung-gu, Seoul, on the morning of the 12th. Photo by Joint Press Corps

With the continuous increase in the base interest rate, deposit (receiving) interest rates have risen, leading to the largest-ever increase in bank fixed deposits in September. According to the financial market trends announced by the Bank of Korea, as of the end of last month, the deposit balance of deposit banks stood at 2,245.4 trillion won, an increase of 36.4 trillion won compared to the end of August. Fixed deposits increased by 32.5 trillion won, marking the largest monthly increase since related statistics began in January 2002. The photo shows a fixed deposit advertisement banner posted at a bank in downtown Seoul on the afternoon of the 13th. Photo by Yonhap News.

The Bank of Korea is expected to take a second big step (raising the base interest rate by 0.50 percentage points) on the 12th, following the move in July. With the consumer price inflation rate still hovering in the mid-5% range and the United States likely to implement its fourth giant step (raising the base interest rate by 0.75 percentage points), experts say that if the interest rate gap between Korea and the U.S. widens to more than 1 percentage point, the pressure on exchange rates and prices will increase, making a baby step (raising the base interest rate by 0.25 percentage points) insufficient as a response. The photo shows a price list at a restaurant in Myeongdong, Jung-gu, Seoul, on the 10th. Photo by Yonhap News.

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Lee Chang-yong, Governor of the Bank of Korea, is explaining the base interest rate hike at a press conference held at the Bank of Korea in Jung-gu, Seoul, on the morning of the 12th. Photo by Joint Press Corps

On the afternoon of the 13th, amid the triple hardships of high inflation, high exchange rates, and high interest rates, an employee of a company is cleaning kitchen utensils in Hwanghak-dong Kitchen Street, Jung-gu, Seoul. Photo by Yonhap News.

New York Stock Exchange (NYSE) trader. Reuters Yonhap News Agency