Workers set up scaffolding for a renovation beneath the logo of the Bank of Korea at its headquarters in Seoul on Jan 14, 2022, after South Korea's central bank raised its key policy rate by 0.25 percentage point to 1.25 percent. (JUNG YEON-JE / AFP)

SEOUL – South Korea's central bank on Thursday froze its benchmark interest rate in a bid to wait and see the effect of previous hikes amid the surging COVID-19 cases.

Bank of Korea (BOK) Governor Lee Ju-yeol and six other monetary policy board members decided unanimously to leave the seven-day repurchase rate unchanged at 1.25 percent.

It was in line with market expectations. According to the Korea Financial Investment Association poll of 100 fixed-income experts, 88 percent predicted the rate on hold.

The rate freeze decision followed a 25-basis-point rate hike in January. In 2021, the BOK raised the key rate from a record low of 0.50 percent to 0.75 percent in August and to 1 percent in November, respectively

The rate freeze decision followed a 25-basis-point rate hike in January. In 2021, the BOK raised the key rate from a record low of 0.50 percent to 0.75 percent in August and to 1 percent in November, respectively.

The central bank adopted a wait-and-see stance as the rapid rate increase can sharply lift the debt-servicing burden amid the record-breaking household debt.

Household credit, which refers to debts owed by households to banks, insurers and other lenders as well as purchase on credit, hit a new high of 1,862.1 trillion won ($1.56 trillion) at the end of December in 2021.

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It was up 134.1 trillion won from a year earlier, marking the second-highest yearly growth.

Debt, owed by microbusiness owners, also surged last year as the self-employed took out loans to survive business losses from the pandemic and the toughened quarantine measures.

The COVID-19 pandemic resurged here in recent weeks amid the spread of the highly-contagious Omicron variant, encouraging the BOK to adjust the pace of rate hikes.

Commuters wearing face masks wait for their trains at a subway station in Seoul, South Korea on Feb 23, 2022. (AHN YOUNG-JOON / AP)

In the latest tally, the country reported 170,016 new COVID-19 cases for the past 24 hours, raising the total number of infections to 2,499,188. The daily caseload stayed above 170,000 for the second straight day.

The Ministry of Economy and Finance said in its monthly economic report last week that the Omicron variant spread was worried to negatively affect the domestic demand despite the solid export and the fast job growth.

Expectations remained high for the BOK to hike its policy rate later this year, due to the higher inflationary pressure and the expected US rate hike in March.

The BOK said in a statement after the rate-setting meeting that the country's consumer price inflation has remained high in the mid- to upper-3 percent range due to the ongoing sharp rise in the petroleum products price and the accelerating increase in the prices of personal services and industrial products.

Expectations remained high for the BOK to hike its policy rate later this year, due to the higher inflationary pressure and the expected US rate hike in March

The central bank forecast that the inflation will run substantially above 3 percent for a considerable time.

South Korea's consumer price index went up 3.6 percent in January from a year earlier, staying above 3 percent for the fourth consecutive month.

The headline inflation topped the BOK's mid-term inflation target of 2 percent for 10 months on the higher supply-side inflationary pressure, driven by expensive crude oil and the global supply chain disruption.

Recent economic indicators showed a relatively rosy picture. The country's export advanced 15.2 percent in January from a year earlier, logging a double-digit expansion for 11 months in a row.

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The number of jobs soared 1,135,000 in January on a yearly basis, keeping an upward trend for 11 straight months.

Revenue among department stores and discount outlets gained in double figures last month, but the sale of locally-made passenger cars tumbled 19.7 percent.