BOK Governor: "Focus on Price Stability, Will Raise Rates Without Delay"

Bank of Korea (BOK) Governor Shin Hyun-song stated today (June 12) that "it is necessary to focus on price stability and raise interest rates without delay."

Governor Shin made the remarks this morning at the 76th anniversary ceremony of the BOK, held at the bank's annex in Jung-gu, Seoul, noting that "the current conditions of growth, inflation, and financial stability are pointing in a relatively clear direction for monetary policy."

He assessed that "data acquired since the Monetary Policy Board meeting in May confirms this," adding that "while monetary policy often faces trade-offs between policy variables, those trade-offs are not significant at this moment."

Regarding inflation, a key consideration for monetary policy, Governor Shin pointed out that "the cost-of-living index, which is closely related to what people feel, is rising faster than the consumer price index, which could influence household inflation expectations."

He further projected that "while the government's price stabilization measures will act as a factor to ease upward pressure, the inflation rate will likely remain above the target level for a considerable period as the impact of supply shocks expands and demand-side price pressures increase."

He emphasized that "since the burden of rising prices is felt more heavily by low-income households, preemptive efforts to stabilize prices are also a way to prevent their burden from worsening."

Addressing concerns that interest rate hikes could increase debt repayment burdens for businesses and households, he stated that "targeted support for such difficulties is more effectively handled through fiscal policy."

Regarding housing prices, Governor Shin assessed that "the high upward trend in sales and jeonse (long-term deposit rental) prices continues in the Seoul metropolitan area, and expectations for further increases have risen again."

He added that "efforts to ease the concentration in the metropolitan area and encourage the flow of funds into productive sectors must be sustained in the mid-to-long term."

Regarding the recent trend of "debt-financed investment" amid rising stock prices, he warned that "excessive leveraged investment can not only have a significant impact on individual profit and loss during price corrections but can also amplify market volatility."

Governor Shin expressed expectations for a reduction in foreign exchange market volatility.

He mentioned that "the market expects the won-dollar exchange rate to gradually stabilize, as the large current account surplus acts as a factor increasing demand for the won through corporate tax payments and expanded domestic investment."

He added, "If high exchange rate volatility persists due to developments such as the situation in the Middle East, it could exacerbate inflationary pressure by driving up import prices."

Regarding the economic outlook, Governor Shin said, "The economy is expected to maintain a solid growth trend as the semiconductor boom continues, and domestic demand recovers due to increased tax revenue from nominal GDP growth, improved income, and expanded investment."

However, he added, "It is necessary to be mindful of the fact that growth remains heavily dependent on the IT sector, leading to persistent gaps between different sectors."

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.