South Korea’s central bank governor Shin says interest rates need to be increased
Shin's comments add to signs the BOK is moving toward tightening as early as next month, with inflation running at a more than two-year high and the won under pressure. A hawkish BOK alongside elevated oil prices tied to the Middle East conflict could support KRW in the near term, though higher rates also raise the cost of carry for Korean assets and may weigh on rate-sensitive sectors.
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BOK Governor Shin Hyun-song said it is necessary to raise interest rates "on time" to ensure price stability, with inflation expected to exceed target for a considerable period amid high oil prices from the Middle East conflict.
Summary:
- BOK Governor Shin Hyun-song said it is necessary to raise interest rates "on time" with a focus on price stability
- Trade-offs between policy variables are not significant at this time, Shin said
- Data since the May policy meeting confirms monetary policy conditions point in one clear direction
- South Korea's May CPI rose to a more than two-year high of 3.1%, above expectations
- Inflation is expected to exceed the BOK's 2% medium-term target for a considerable period
- The BOK held rates steady last month, with a hawkish split among board members signalling a possible shift toward tightening
Bank of Korea Governor Shin Hyun-song said on Friday it is necessary to raise interest rates "on time" with a focus on price stability, as inflation is set to exceed target for a considerable period amid elevated oil prices linked to the Middle East conflict.
Shin said the usual trade-offs facing monetary policy are not significant at present, and that data released since the central bank's May policy meeting confirm that conditions point in a single, clear direction.
His comments follow data last week showing South Korea's consumer inflation accelerated to 3.1% in May, a more than two-year high and above market expectations, strengthening the case for tightening as early as next month.
Inflation is expected to remain above the BOK's 2% medium-term target for some time, Shin said. The central bank kept its benchmark rate unchanged at last month's meeting, though a hawkish split among the seven-member board signalled growing appetite for a more restrictive stance to curb inflation and support a weakened won.
With oil prices remaining sensitive to developments in the Middle East, the inflation outlook Shin described leaves the BOK with limited room to delay, reinforcing expectations that a rate increase could come into view at the bank's next policy meeting.
This article was written by Eamonn Sheridan at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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