BOK: Pace of Base Rate Hikes to Be Decided Based on Internal and External Conditions

▲ Park Chong-woo, Deputy Governor of the Bank of Korea

The Bank of Korea (BOK) stated today (September 10) regarding the future operation of the base rate, "It is necessary to determine the timing and pace of additional hikes while monitoring changes in internal and external conditions."

Monetary Policy Board member Kim Jong-hwa made the remarks in a monetary and credit policy report released by the BOK, saying, "Solid growth and inflation above the target level (2%) are expected to continue for a considerable period."

In detail, he pointed out as key considerations, "Whether the recently re-escalated military tensions in the Middle East will drive up cost pressures again, and how much and at what pace the semiconductor-driven export boom will spill over into domestic demand and demand-side price pressures."

From the perspective of financial stability, he emphasized, "We must continue to pay close attention to risks surrounding the Seoul metropolitan housing market and household debt, as well as the possibility of renewed exchange rate volatility stemming from shifts in the monetary policy stance of the U.S. Federal Reserve."

Kim added, "We also need to closely examine the impact of the past two rate hikes," noting that "as burdens on certain vulnerable sectors are expected to increase, a response through a combination of macroeconomic policies is necessary."

Separately, the BOK stated in the report that it will "operate monetary policy to ensure that inflation stabilizes at the target level from a medium-term perspective, while paying close attention to financial stability."

Regarding the possibility of a base rate hike in October during a briefing today, BOK Deputy Governor Park Chong-woo gave a principled response, saying, "We will make a decision after comprehensively reviewing the data coming in before the meeting."

He explained, "We view the current base rate as being around the upper end of the neutral rate range," while adding, "As we are re-estimating the neutral rate, it is difficult to evaluate and discuss it based on the existing range."

Regarding recent international oil prices, Deputy Governor Park remarked, "Although prices briefly exceeded 100 USD per barrel, it is premature to say that our scenarios have changed based on the trends of the past two days or so."

In addition, regarding the dot plot introduced last February, he noted, "We believe it is rapidly establishing itself as an important communication tool in the market."

(Photo: Yonhap News)

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