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ON POINT: Economist's take on problems facing S. Korean economy Updated: 2022-01-19 05:31:20 KST

Now it’s time for On Point, where we speak to experts to delve deeper into the biggest news stories in the spotlight right now.
South Korea’s central bank last week hiked its base interest rate to pre-pandemic levels as policymakers look to get a handle on soaring inflation and skyrocketing household debt.
The decision by the Bank of Korea to up the rate from one percent to one-and-a-quarter percent was widely forecast by analysts and was the BOK’s third increase in just half a year.
South Korea isn't the only country attempting a similar tactic as central banks globally, including in the U.S., are trying to balance rates to tame inflation.
And inflation is of particular concern for South Korea.
Recently-released data showed consumer prices in South Korea in 2021 rose by two.five percent, a high not seen here in ten years.
For more on the economic currents affecting South Korea as we seem to be coming out the other side of the pandemic, we connect to Professor Oh Joon-seok from Sookmyung Women's University's School of Business.

Professor, how do upward changes in the base rate affect regular people. In layman’s terms, how can it be felt in things like people’s mortgage payments, their credit card bills and their savings?

Some economists argue interest rates aren’t necessarily the right tool to control inflation, saying it that while it might be a medicine of sorts, it can often be the wrong kind of medicine. What side of the argument do you stand?

The Bank of Korea almost always cites soaring household debt as one of the main drivers in its decision to raise rates. Can you explain why higher rates stop people borrowing against their homes or taking out new mortgages?

Finally, there seem to be two clear camps forming right now - those who are really positive that 2022 will be a good year and those who insist we are not out of the woods yet - which camp are you in and why?

We appreciate your insights as always. Professor Oh Joon-seok, thank you and we hope to speak to you again soon.
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