Bank of Korea Governor Shin Hyun-song indicated on July 16 that the central bank will maintain its tightening stance while keeping the possibility of further interest rate hikes open. He emphasized that the bank will respond until there is confidence that inflation rates stabilize at target levels.
During a press conference following the Monetary Policy Committee meeting, Shin responded to a question about the timing of future rate increases, stating, "Monetary policy paths are not predetermined. The data that comes in will be crucial, so we cannot make definitive statements in either direction."
Shin assessed that it is necessary to maintain a tightening policy considering inflation and growth conditions. He said, "We will respond until we are confident that inflation rates stabilize at target levels, and the extent of our response will depend on the data we receive going forward."
He particularly noted the potential for increased demand-side inflation pressure due to the semiconductor boom. "With strong semiconductor exports improving trade conditions, domestic gross income (GDI) is growing much faster than gross domestic product (GDP)," he said. "We must not overlook the inflationary pressures that may arise from this income improvement."
Shin recalled that in 2021, major central banks underestimated demand-side inflation pressures, leading to high inflation, a lesson that the Monetary Policy Committee members are aware of.
Looking ahead, he identified the second quarter's growth rate and inflation indicators as key variables for monetary policy. He stated, "We will closely monitor whether the upcoming second quarter GDP and GDI continue the strong trend from the first quarter and whether the export boom persists. The consumer price index for July, as well as core and living costs, will also be important criteria for our decisions."
Financial stability was also highlighted as a significant factor in future rate decisions. Shin noted, "While the exchange rate has stabilized somewhat, it remains at a high level, and import prices are still elevated compared to last year. We will continue to closely observe the housing market in the metropolitan area and the rising household debt levels."
* This article has been translated by AI.
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