Lee Hyo-jin covers the Bank of Korea, the banking industry and broader financial news. Her previous beats include foreign affairs, North Korea and general reporting on Korean society.
Senior BOK official leaves door open to further rate hikes
Ryoo Sang-dai, senior deputy governor at the Bank of Korea (BOK), speaks during a press conference at the BOK's headquarters in Seoul, Tuesday. Courtesy of BOK
By Lee Hyo-jin
A senior Bank of Korea (BOK) official said Tuesday that further interest rate hikes are likely unless a major economic shock emerges, keeping the door open to additional tightening.
Ryoo Sang-dai, senior deputy governor of the BOK, made the remarks during a press briefing as the central bank weighs persistent inflationary pressures, stronger-than-expected economic growth and financial stability risks.
In response to a question about the possibility of a rate hike in August, Ryoo said the BOK has "entered a tightening cycle" with its July hike.
"If there is no particular shock or special factor, the possibility of further rate hikes can be considered high," he said.
The BOK raised its benchmark interest rate by 0.25 percentage point last month to 2.75 percent, marking its first rate hike in three and a half years. The move came as the economy showed stronger-than-expected growth, while inflationary pressures stemming from Middle East tensions remained a concern.
Ryoo said the timing and pace of any additional hikes would depend on economic data, particularly the outlook for growth and inflation.
His comments came days before the end of his term as senior deputy governor on Aug. 20, meaning he will not attend the BOK's next rate-setting meeting on Aug. 27.
The outgoing official said the Monetary Policy Board would closely monitor updated economic projections, as well as daily indicators such as credit card spending, before making its decision at the next policy meeting.
He also said that recent stabilization in the won-dollar exchange rate and volatility in the stock market were unlikely to have a major impact on the BOK's monetary policy decision.
"The recent movements in stock prices or the exchange rate may give policymakers some room, but I don't think they are particularly important factors," Ryoo told reporters. "The most important factors are whether core inflation will remain high and whether economic growth will continue."
The won has recently strengthened after coming under heavy pressure in June, when the currency weakened toward the 1,600 won-per-dollar. It has since recovered to the 1,400 won range in recent weeks.
Ryoo said the won remains relatively weak despite its recent recovery, but is likely to gradually stabilize.
"Even though the exchange rate has come down, it is still at a high level," he said. "Although I cannot say how quickly it will fall, considering Korea’s current account and trade surpluses and other economic fundamentals, I expect the won to appreciate and gradually stabilize."