Bank of Korea hikes key rate amid rising inflation

South Korea's central bank has raised its key interest rate, citing a recovering economy and rising prices. The hike is the first since August.

At a policy meeting on Thursday, the Bank of Korea set the base rate at a quarter of a percentage point higher to 1 percent. It's the first time in 20 months for the rate to exceed that level.

Consumer prices rose 3.2 percent last month from a year earlier, a level not seen in nine years.

Surging property prices are driving up household debt to record-high levels. The central bank expects the inflation rate will stay above its target of 2 percent for the time being.

Governor Lee Ju-yeol said the BOK policy is still in accommodative territory, judging by a recent spike in prices.

He also indicated the possibility of another hike in the first quarter of next year.

Central banks in other countries are also tightening in a bid to contain inflation. They are tapering their bond purchases or targeting higher interest rates.