Bank of Korea holds rate, Governor Shin says growth and inflation stronger than in August
In short
Bank of Korea Governor Shin Hyun-song said on 22 October that growth and price rises are stronger than in the bank's August outlook and that the current tightening stance needs to continue. The Monetary Policy Board had decided to keep the base rate unchanged, according to Chosun Ilbo. He said the bank will respond until inflation converges stably to its target.
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Bank of Korea Governor Shin Hyun-song said on 22 October that growth and price rises are stronger than in the bank's August outlook. Asia Economy quoted him as saying upside risks to growth and prices have grown since the August outlook. Newsis quoted him as saying the growth trend and the rise in prices are stronger than in August and that the current stance needs to continue. [ 1 , 2 ]
Chosun Ilbo reported that Shin spoke at a press conference after the Monetary Policy Board decided to hold the base rate. The newspaper wrote that he hinted at resuming rate increases soon because growth and price rises remain strong. Shin said the growth trend and price rises were stronger than expected in some respects, so the bank sees a need to continue the current tightening stance, and that it would respond until price rises converge stably to the target level. [ 3 ]
On growth, Shin said the domestic economy kept expanding faster than expected on strong exports and investment, and that strong growth in exports and investment is expected to continue because of the semiconductor upturn. He said growth this year and next year is therefore expected to exceed the August forecasts of 3.3% and 2.9% by a considerable margin. [ 3 ]
On prices, Shin said that cost pressures are continuing to pass through and demand-side pressure is gradually growing, so inflation is expected to stay above the target level for a considerable period. He said this year's consumer and core inflation should broadly match the August forecasts of 2.7% and 2.5%, while next year's would exceed the earlier forecasts of 2.3% and 2.5%. Chosun Ilbo noted that the bank's target is 2% year on year in consumer prices. [ 3 ]
Why it matters
The governor's remarks indicate the bank sees upside risks to both growth and prices and does not plan to ease its stance. Chosun Ilbo read them as a hint that rate hikes could resume soon, though the governor's quoted words in the documents do not state that directly.
Key facts
- Governor Shin Hyun-song spoke on 22 October at a press conference after the Monetary Policy Board meeting. [ 3 ]
- The board decided to keep the base rate unchanged. [ 3 ]
- Shin said upside risks to growth and prices have grown since the August outlook. [ 1 , 2 , 3 ]
- Shin said the current tightening stance needs to continue. [ 2 , 3 ]
- The bank's August forecasts were growth of 3.3% this year and 2.9% next year; Shin said growth would exceed them by a considerable margin. [ 3 ]
- Shin said this year's consumer and core inflation should broadly match the August forecasts of 2.7% and 2.5%, but next year's would exceed the earlier forecasts of 2.3% and 2.5%. [ 3 ]
- The bank's inflation target is 2% year on year in consumer prices. [ 3 ]
Confirmed by several sources
Still unclear
- Whether and when the bank will resume raising interest rates. Only Chosun Ilbo says Shin hinted at resuming hikes soon; the quoted remarks speak of continuing the tightening stance and responding until inflation converges to target.
- The size of the base rate and the vote on the hold are not given. The documents report the hold only in general terms, and only in one article.