South Korean Central Bank Official: Inflation Risks Rising, Time to Consider Rate Hike

Odaily Odaily reported that Ryoo Sangdai, Senior Deputy Governor of the Bank of Korea, stated that as economic growth seems unlikely to fall significantly below the central bank's earlier forecast, while 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 fact that the economy has proven more resilient than expected following the outbreak of the Middle East war, along with rising inflationary pressures. The Bank of Korea has kept its benchmark policy rate unchanged since last July. In February, the Bank of Korea forecasted annual economic growth of 2% and inflation of 2.2%. Although policymakers initially expected turmoil in Iran to drag on economic growth and push up prices, recent data shows that, thanks to strong semiconductor shipments, the growth outlook has not deteriorated as feared, while inflation risks have increased.

Regarding the Korean won exchange rate, Ryoo stated that the won remains weaker than in the past based on economic fundamentals, although the market does not seem to view the current level as a major problem. The won-dollar exchange rate recently touched its lowest level since the global financial crisis. When addressing concerns about the economy's reliance on semiconductors, Ryoo said the key risk lies in whether the cycle turns or the spillover effects are weaker than expected, rather than the increase in the industry's share itself. (Jin Shi)