Bank of Korea chief says monetary policy to stay restrictive for now
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BANGKOK, Oct 13 : The Bank of Korea will maintain a restrictive monetary policy stance as it seeks to tame persistent price pressures, with headline and core inflation expected to stay above target for "some time", the central bank's chief said on Tuesday.
"Inflation has really picked up, both from the cost-push and the demand-pull," said Governor Shin Hyun Song, referring to rising energy costs stemming from the war in the Middle East and surging demand for artificial intelligence, where South Korea is a key player.
"In (South) Korea, the AI cycle really swamps the negative effect from the Middle East. But for inflation, of course, they combine," Shin said at a session at the annual meetings of the IMF and World Bank in Bangkok.
While South Korea's annual consumer inflation rate slowed to 2.9 per cent in September, it was still well above the central bank's 2 per cent target.
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Shin's remarks come after President Lee Jae Myung said earlier in the day that a near-term rate rise was a near certainty as South Korea needed to narrow a widening yield gap with the United States and align with global monetary tightening.
The benchmark interest rate is currently at 3.00 per cent following back-to-back rate hikes in July and August.
Speaking to reporters after the session, Governor Shin said the consecutive rate hikes "certainly had some effect that's desirable", but declined to comment on whether there would be another rate rise at the central bank's policy review on October 22.
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