Senior official of the Bank of Korea: Inflation risks are increasing; it's time to consider raising interest rates

Odaily Planet Daily News reports that South Korea’s senior deputy governor of the central bank, Ryoo Sang-dai, stated that since economic growth seems unlikely to fall significantly below the central bank’s earlier forecasts and inflation may exceed previous expectations, it is time to consider raising interest rates. Ryoo is also a member of the Bank of Korea’s Monetary Policy Committee. He cited the resilience of the economy being stronger than expected after the outbreak of the Middle East war, as well as rising inflationary pressures. Since July last year, the Bank of Korea has kept its benchmark policy rate unchanged. In February this year, the Bank of Korea predicted that economic growth would be 2% and inflation would be 2.2%. Although policymakers initially expected turmoil in Iran to drag down economic growth and push up prices, recent data shows that due to strong semiconductor shipments, the growth outlook has not worsened as feared, and inflation risks have increased.

Regarding the won exchange rate, Ryoo said that from the economic fundamentals, the won is still weaker than in the past, although the market does not seem to consider the current level a major issue. The won-to-dollar exchange rate recently hit its lowest level since the global financial crisis. When discussing concerns about the economy’s dependence on semiconductors, Ryoo stated that the key risk is whether the cycle will turn or whether spillover effects will be lower than expected, rather than the industry’s increasing share itself. (Jin10)