BOK Gov. Rhee Chang-yong, center, presides over a rate-setting monetary policy meeting held at the central bank's headquarters in Seoul, Jan. 13. Yonhap

Korea's central bank delivered a quarter percentage-point interest rate hike Friday as it focuses on tackling persistently high inflation despite mounting worries over an economic slowdown.

The Bank of Korea (BOK) convened this year's first rate-setting monetary policy board meeting early in the day and lifted the benchmark seven-day repo rate from 3.25 percent to 3.5 percent.

This marked the seventh straight rate increase since April last year and came after a 0.25 percentage point hike delivered at the last meeting of 2022 in November.

It also represented the 10th increase of a combined 3 percentage points since August 2021, when the BOK began "normalizing" the ultralow rate, put in place to bolster the pandemic-hit economy, and fighting fast-rising inflation pressure.

Friday's rate hike came as inflation remains high despite a recent letup caused by a fall in crude oil prices.

In December, consumer prices, a major gauge of inflation, rose 5 percent on-year, sharply slowing from a 6.3 percent spike in July, the fastest rise since November 1998. They still remain higher than the BOK's medium target range of 2 percent.

The BOK recently predicted inflation pressure will likely moderate "steadily" this year but prices could grow at around 5 percent "for the time being."

BOK Gov. Rhee Chang-yong reiterated concerns over inflation in his New Year's Day message, in which he said the priority of the central bank's monetary policy will stick to price stability going forward.

Experts are cautiously predicting the BOK will end more than a year of rate hikes either later this year or early next year, as it will not be able to turn a blind eye to growing recession woes.

Korea's economy is facing growing risks of losing steam with exports, a major driver of growth, on the decline for months amid worries over a global recession. Consumption and corporate investment are also under strain from the tumbling real estate market and high borrowing costs due to the central bank's monetary tightening.

In an apparent recognition of toughening conditions for the economy, Rhee earlier said he will closely cooperate with the government and other relevant agencies to engineer an economic "soft landing."

The BOK has hinted that the terminal interest rate of the ongoing tightening campaign will likely rise to as high as 3.5 percent.

Market watchers, however, say it could be higher than that in consideration of the U.S. Federal Reserve's hawkish stance that could widen the gap in rates between the two countries, a phenomenon that could prompt capital outflows to the U.S. for higher returns and put upward pressure on inflation by making imports costlier. (Yonhap)