Bank of Korea (BOK) Gov. Rhee Chang-yong bangs the gavel to open a Monetary Policy Committee meeting at the central bank in Seoul, in this file photo taken Feb. 22, 2024. (Image courtesy of Yonhap)
SEOUL, Jun. 12 (Korea Bizwire) — South Korea’s chief central banker on Wednesday emphasized the importance of a timely shift toward a monetary easing policy as inflation in Asia’s fourth-largest economy still runs high.
In a speech to celebrate the 74th anniversary of the central bank’s establishment, Bank of Korea Gov. Rhee Chang-yong said inflation moderation has been continuing, but risks remain that affect the pace of inflation slowing down, such as volatile currency rates and geopolitical risks.
“We have to pay hefty policy costs if we raise interest rates because of a resurgence of high inflation following a hasty pivot toward policy easing,” Rhee said.
He said the central bank needs to keep its current restrictive policy until it is assured that inflation is moving toward the central bank’s inflation target.
Last month, the central bank froze its key rate at 3.5 percent for the 11th straight session in the face of still-high inflation and a faster-than-expected growth projection for the year.
The BOK has continued to stand pat following rate freezes since February last year after delivering seven consecutive rate hikes from April 2022 to January 2023.
Consumer prices, a key gauge of inflation, rose 2.7 percent on-year last month, compared with the 2.9 percent on-year rise a month earlier, marking the second straight month that the price growth slowed down and the figure stayed below 3 percent.
In January, inflation fell below 3 percent for the first time since July 2023 to come to 2.8 percent, but it rose back to 3.1 percent in February and stayed at the same level the following month.
Earlier, Rhee said the central bank may consider a potential rate cut if inflation cools down to around 2.3 percent to 2.4 percent. The central bank’s inflation target is set at 2 percent.
Last month, the BOK heightened its growth projection for the year.
The central bank jacked up its growth estimate to 2.5 percent for the year, up from its earlier projection of 2.1 percent, but slashed the 2025 growth outlook to 2.1 percent from 2.3 percent.
The bank kept its inflation outlook at 2.6 percent for the year.
(Yonhap)
