When the Bank of Korea decided to raise the base rate last month for the first time in three years and six months, its Monetary Policy Board members agreed that proactive action against inflation is necessary to ensure financial stability.

According to the minutes of the Monetary Policy Board meeting released by the BOK today, all board members voted in favor of raising the base rate from 2.50 percent to 2.75 percent, taking domestic and global financial and economic conditions into account.

One member diagnosed, "Since the May meeting, inflation concerns have grown and financial stability risks have persisted, increasing the necessity of a rate hike. On the other hand, growth has become more solid, easing the burden of raising rates."

The member added, "As this hike is hardly sufficient to achieve the inflation target, it is necessary to continue raising rates in line with the growth and inflation projection paths," hinting at additional hikes.

However, the member added, "The pace of hikes should be determined by weighing the pros and cons of preemptive versus gradual responses."

Another member emphasized, "Intensive policy responses are required, paying attention to financial stability risks along with stabilizing the value of currency such as inflation and exchange rates, which are the central bank's top immediate tasks."

Yet another member projected, "The improvement in terms of trade driven by soaring semiconductor export prices will significantly boost nominal growth, leading to expanded corporate operating profits, improved household income conditions, and increased government tax revenue, while domestic economic recovery continues. Both this year and next year growth rates will exceed the May projections."

The member went on to mention, "In terms of financial stability, we must continue to pay close attention to the Seoul metropolitan housing market, household debt conditions, and high exchange rate volatility."

Another member analyzed, "While domestic economic projections have improved due to the booming semiconductor sector, upward risks to underlying inflation have expanded due to increased demand pressures resulting from improving income conditions."

The member emphasized, "As vigilance against financial stability risks, such as the possibility of asset price increases accompanied by credit expansion, has also heightened, we must respond to inflation and the accumulation of financial imbalances through a base rate hike."
 
(Photo: Yonhap News)