22nd morning, in the 16th-floor meeting room of the Bank of Korea in Jung-gu, Seoul, the atmosphere was relatively calm ahead of the Monetary Policy Committee meeting. As this was the first meeting following two consecutive rate hikes, known as 'back-to-back increases,' the media's attention was focused on Bank of Korea Governor Shin Hyun-song.
Governor Shin entered the meeting room around 9 a.m., wearing a black jacket and a yellow tie featuring the Bank of Korea's colors. Upon taking his seat, he addressed the press, saying, "The weather has become quite chilly. I hope everyone takes care of their health." He then acknowledged the reporters' efforts and tapped the gavel three times to commence the meeting. Given that this was a meeting to decide the base rate, he did not provide any additional messages regarding the direction of monetary policy.
Monetary Policy Committee members arrived before Governor Shin. At 8:54 a.m., members Hwang Geon-il and Jang Yong-seong entered the meeting room, followed by Kwon Min-soo, Lee Soo-hyung, Kim Jong-hwa, and Kim Jin-il.
While the atmosphere was calm, the excitement among reporters in the meeting room was palpable. About 40 individuals, including Bank of Korea executives and journalists, gathered, focusing on the expressions and remarks of Governor Shin and the committee members just before the meeting began.
Market analysts widely expect the base rate to remain at 3.00% during this meeting. The Bank of Korea raised the base rate by 0.25 percentage points in both July and August, increasing it from 2.50% to 3.00%. Given the consecutive rate hikes, analysts suggest that it is necessary to assess the cumulative tightening effects and the trends in inflation and the economy during this meeting.
According to a survey released by the Korea Financial Investment Association on the 20th, 93% of bond market participants anticipate that the base rate will be held steady at this Monetary Policy Committee meeting, while only 7% expect an increase.
Although inflation remains above the target level, it has decreased to the upper 2% range, leading to the prevailing view that there is no urgent need for a third consecutive rate hike. The consumer price inflation rate for September was 2.9% compared to the same month last year, down from 3.1% the previous month. Core inflation also showed a reduced increase, recorded at 2.8%, down from 3.4% the previous month due to the fading base effect of communication fees.
The recent stabilization of the won-dollar exchange rate, which has recently dropped to the 1,320 won range, also supports the argument for a pause in rate hikes.
However, even if the Bank of Korea decides to keep rates steady, it is expected to maintain a 'hawkish' stance, leaving the possibility of future increases open. This is due to ongoing concerns about demand-side inflationary pressures that have not yet been alleviated.
Governor Shin previously stated during a National Assembly audit on the 12th, "The nominal GDP in the second quarter increased by 26.4% compared to the same period last year, indicating improved income conditions. Ultimately, we expect inflation driven by demand-side factors to emerge."
As a result, this Monetary Policy Committee meeting will likely focus on whether there will be dissenting opinions for a rate hike in response to stronger-than-expected growth and inflationary pressures, as well as what signals Governor Shin may provide regarding future monetary policy direction.
Meanwhile, the Bank of Korea is expected to announce the results of its base rate decision around 10 a.m. Following that, at approximately 11:10 a.m., a briefing on the monetary policy direction will be held, where Governor Shin will explain the rationale behind the rate decision and future policy direction.
* This article has been translated by AI.
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