Korean Central Bank Official: Rising Inflation Risks Make It Time to Consider Rate Hikes

Odaily reports that Ryoo Sangdai, Senior Deputy Governor of the Bank of Korea, stated that since economic growth appears 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 economy's greater-than-expected resilience following the outbreak of the Middle East war and rising inflationary pressures. The Bank of Korea has kept its benchmark policy rate unchanged since July last year. In February, the central bank predicted economic growth of 2% and inflation of 2.2% for this year. Although policymakers initially expected turmoil in Iran to weigh on economic growth and push up prices, recent data shows that strong semiconductor shipments have prevented the growth outlook from deteriorating as feared, while inflation risks have increased.

Regarding the South Korean won's exchange rate, Ryoo stated that from an economic fundamentals perspective, the won remains weaker than in the past, although the market does not seem to view the current level as a major problem. The won's exchange rate against the US dollar recently touched its lowest level since the global financial crisis. Addressing concerns about the economy's reliance on semiconductors, Ryoo noted that the key risk lies in whether the cycle will turn or if spillover effects will be weaker than expected, rather than the sector's rising share itself. (Jin Shi)