BOK chief stresses need to curb inflation amid AI boom, Mideast crisis
Bank of Korea Gov. Shin Hyun-song speaks during a parliamentary audit at the bank's headquarters in Seoul, Monday. Joint Press Corps
The chief of the Bank of Korea (BOK) on Wednesday stressed the importance of keeping inflation under control, saying the global artificial intelligence (AI) investment boom and the prolonged Middle East conflict are combining to push up consumer prices.
"Korea sits at the intersection of two of the most important trends right now. One is AI and the big investment boom, and the other one is the war in the Middle East," BOK Gov. Shin Hyun-song said during a CNN Global Perspectives session livestreamed online on the sidelines of the International Monetary Fund-World Bank Group (IMF-WBG) annual meetings in Bangkok, Thailand.
"In terms of activity, they pull in opposite directions. But the AI economy is swamping the negative effect of the war in the Middle East. But in terms of inflation, and this is relevant for the central bank, they are actually combining to raise inflation," he said.
Korea is at the forefront of the global AI boom, as demand for AI computing infrastructure has fueled demand for memory chips, driving exports and profits at the country's two major chipmakers, Samsung Electronics Co. and SK hynix Inc., to record highs.
However, export-driven growth has raised concerns that the benefits of the semiconductor boom have not fully spilled over into the broader economy, deepening economic polarization and contributing to what is known as a K-shaped economy.
"We do, in fact, have a pretty sharp case of a K-shaped economy," Shin said, adding that people in the lowest income group are hit hardest by inflation.
"I think the best thing from a central bank perspective is to just keep in mind that inflation hurts the lowest-income members of the population most," he said. "So this is why we need to get inflation down, and getting monetary policy right is absolutely key."
His remarks come as the BOK has tightened monetary policy to address inflationary pressures, with inflation remaining above its 2 percent target.
The central bank raised its benchmark interest rate to 3 percent through consecutive hikes at its July and August meetings, describing the moves as "preemptive" measures to prevent inflationary pressures from accelerating further.
The BOK will hold its next rate-setting meeting next week.