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Shin Hyun-song, Governor of the Bank of Korea, speaks at a monetary policy press briefing at the bank’s headquarters in Jung-gu, Seoul, on May 28. (Photo: Yonhap News Agency) |
[Alpha Biz= Paul Lee] SEOUL, June 2 — Shin Hyun-song, Governor of the Bank of Korea, said on June 1 that there are limited constraints on adjusting monetary policy in response to inflation, signaling that the central bank faces fewer obstacles in raising interest rates.
The remarks are seen as reinforcing expectations for a potential rate hike as early as July, following guidance from the Bank of Korea’s Monetary Policy Board on May 28.
Speaking during a dialogue with Isabel Schnabel, Executive Board member of the European Central Bank, at the BOK International Conference, Shin said Korea’s economic growth remains “very strong,” adding that stronger growth reduces policy trade-offs.
He noted that robust semiconductor exports have supported the economy, offsetting the impact of rising energy prices stemming from geopolitical tensions. “This gives us more room to maneuver in conducting monetary policy,” Shin said.
South Korea’s real gross domestic product (GDP) rose 3.6% year-on-year in the first quarter, while real gross domestic income (GDI) increased 12.3%.
The Bank of Korea held its benchmark interest rate steady at 2.5% at its May 28 policy meeting, though two board members dissented, calling for a 25-basis-point hike. The policy statement indicated that the timing of a rate increase would be determined after assessing inflationary pressures.
Following Shin’s remarks, South Korea’s three-year government bond yield rose 5.9 basis points to 3.79% in the Seoul bond market.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
