The Bank of Korea announced on September 10 that it will determine the timing and pace of interest rate hikes based on inflationary pressures from the Middle East and the positive performance of semiconductor exports. However, it emphasized that it is difficult to predict an interest rate increase in October at this time.
Kim Jong-hwa, a member of the Monetary Policy Committee, stated in the Monetary Credit Policy Report released today, "Given the robust growth and inflation rates exceeding target levels are expected to persist for a considerable time, it is necessary to assess changes in domestic and external conditions to decide on the timing and pace of further increases."
Kim identified military tensions in the Middle East and the strong performance of semiconductor exports as key factors influencing future monetary policy. He noted the need to monitor whether the ongoing conflict in the Middle East will raise cost pressures and how quickly the positive semiconductor export performance will translate into domestic demand and inflationary pressures.
He also highlighted the risks of financial imbalances, such as the housing market in the metropolitan area and household debt, as well as the potential for increased exchange rate volatility due to changes in the U.S. Federal Reserve's monetary policy.
However, the Bank of Korea clarified that it is not signaling an imminent interest rate hike in October. Park Jong-woo, Deputy Governor of the Bank of Korea, stated during the briefing on the Monetary Credit Policy Report that it is difficult to definitively state how inflation will trend at this point, making it challenging to predict the October interest rate.
As tensions between the U.S. and Iran have escalated, pushing international oil prices above $100 again, the impact on inflation remains uncertain. Park explained, "There is significant uncertainty regarding how long the conflict will last, and we need to assess its impact on inflation trends." He emphasized that the decision will be made based on a comprehensive review of data collected up to the meeting, indicating a 'live meeting' approach.
He also noted that financial stability concerns cannot be used as a direct justification for an immediate interest rate hike. Addressing issues in the housing market and household debt cannot be resolved quickly through interest rate adjustments alone.
The Bank of Korea assessed that financial imbalances are increasing, as housing prices in the metropolitan area continue to rise sharply, and household loans show a steady upward trend.
Park stated, "Since housing supply and lending policies need to be sustained in one direction over a long period, it is unrealistic to resolve these issues by raising rates in October. We must consider the overall trends in inflation and other factors before making a decision in October."
Furthermore, the Bank of Korea noted that recent stock market adjustments and interest rate hikes have significantly reduced the degree of financial easing. Choi Chang-ho, head of the Bank's Monetary Policy Division, remarked, "Until the first half of the year, risk appetite was high, leading to a more accommodative financial situation. Recently, however, stock prices have adjusted, and interest rates have risen, resulting in a substantial reduction in easing conditions."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.