Bank of Korea Governor Shin Hyun-sung stated on May 28 that a stronger-than-expected semiconductor market and the resulting increase in exports will raise the country's growth rate by 0.7 percentage points.
Following a monetary policy committee meeting where the base rate was held steady at 2.50%, Shin held a press conference and noted that while the ongoing conflict in the Middle East is expected to lower growth by 0.4 percentage points, government fiscal measures and a booming stock market could boost growth by 0.2 and 0.1 percentage points, respectively.
Regarding consumer price inflation, Shin predicted that the effects of the Middle East conflict would emerge. He remarked, "The government's price stabilization measures will help alleviate upward pressure, but the rising international oil prices are likely to impact the prices of industrial goods and services, leading to greater demand pressure than anticipated as the economy continues to improve."
In fact, domestic prices surged significantly due to rising oil prices, with the consumer price inflation rate reaching 2.6% in April, and short-term inflation expectations hovering in the upper 2% range.
Looking ahead to monetary policy direction, Shin indicated that an increase in the base rate would be necessary at an appropriate time. The Bank of Korea's monetary policy, which has maintained the base rate for eight consecutive meetings, is now more likely to shift toward a tightening stance.
He explained, "With inflation expected to exceed target levels for an extended period and growth showing solid improvement, we need to remain cautious about financial stability, particularly regarding exchange rate volatility, housing prices in the metropolitan area, and household debt risks. Considering these factors, it will be necessary to raise the base rate at an appropriate time."
* This article has been translated by AI.
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