Inflation in Korea

Recently, I read an article claiming that inflation reached 6% in Korea. This rate has become higher since my last post about inflation. A lot of people might think 6% is high, and it is. For example, my mma account pays around 5% interest. With inflation running at 6%, I'm actually losing 1% by keeping money in the bank. = (

Some of the worst inflationary periods in the U.S. were in the late 1970s to early 1980s.

Year Inflation Fed Discount Rate

1979 11.3% 12%
1980 13.5% 14%
1981 10.3% 14%
1982 6.2% 11.5%
1983 3.2% 9%

I remember when my parents bought a house in 1981, their mortgage interest rate was 15%. lol Today, there are credit cards lower than 15%.

See all the bad things that can happen from inflation?

How did the U.S. Federal Reserve fight inflation? By tightening the money supply. How do they tighten the money supply? By raising the Fed Discount Rate (which is the rate the Fed charges banks to borrow money). In 1980, the Fed raised the discount rate to 14%! By 1983, inflation was tamed. However, there was a severe recession in the U.S. from 1980-1982. Unemployment reached 10% at one point. Many argue that this recession was necessary to fight inflation.

What will the Bank of Korea do next? Recently, they raised their rate to 5.25%, but that might not be enough to tame inflation. I expect mortgage rates in Korea to increase in the future.
Also, the Korean won will continue to fall if prices here are not stabilized. In addition, the Korean government could lower taxes and duties on all imported goods. This will spur price competition, which would lower prices for all consumer goods. Lower prices = happy consumers.