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.
BOK chief says rate hike needed at appropriate time
Bank of Korea Gov. Shin Hyun-song speaks during a parliamentary session at the National Assembly in Seoul, Thursday. Yonhap
By Lee Hyo-jin
Bank of Korea (BOK) Gov. Shin Hyun-song on Thursday reiterated the need to raise interest rates at an appropriate time, reinforcing expectations that the central bank could begin a rate-hiking cycle as early as next week's policy meeting.
"Given that inflation remains above target, and considering improving economic growth and mounting financial stability risks, I believe it will be necessary to raise the base rate at an appropriate time," Shin said during a National Assembly meeting.
He added that robust growth fueled by the semiconductor sector is expected to continue, while inflation is likely to remain above the BOK's target for a considerable period.
"The timing of a rate hike will be determined after comprehensively assessing inflationary pressures and the pace of economic recovery," Shin said.
The remarks were widely interpreted as his latest hawkish signal ahead of the Monetary Policy Board's rate-setting meeting scheduled for next Thursday. The central bank has kept its benchmark rate unchanged at 2.5 percent since May 2025.
In recent months, the central bank chief has repeatedly stressed the need for a rate hike as inflationary pressures persist.
At a press conference following the BOK's May 28 policy meeting, Shin said "the path for monetary policy is clear given the current state of growth, inflation and financial stability."
In June, he said conditions had become more favorable for adjusting monetary policy to contain inflation.
During Thursday's Assembly meeting, Shin also expressed confidence that the Korean won would strengthen over time despite its recent weakness against the U.S. dollar.
"The current account surplus has accumulated to a significant level," he said. "From a fundamental perspective, I believe there is considerable room for the won to strengthen going forward."
He said the weakness of the won was largely driven by a stronger U.S. dollar amid expectations of changes in Washington's monetary policy, while foreign investors' portfolio rebalancing in the Korean stock market had also weighed on the local currency.
The won has hovered around the 1,500 won mark against the dollar in recent months, marking its weakest level since the global financial crisis.
Asked about the possibility of a currency swap arrangement with the United States, Shin replied that such an agreement would have positive symbolic and psychological effects.
"The purpose of a currency swap is to provide liquidity. At this point, liquidity is not lacking," he said, indicating there is no immediate need for emergency liquidity support through such a currency swap.