Bank of Korea likely to raise interest rates further, outgoing deputy chief says

South Korea's Bank of Korea is likely to raise interest rates further to combat persistent inflation, according to the outgoing deputy chief. Ryoo Sang-dai, the Senior Deputy Governor, indicated at a press conference that unless there is an extraordinary shock, an additional hike is highly probable. The central bank increased rates for the first time in 3.5 years last month, signaling more hikes are imminent due to robust growth and inflation risks.

Ryoo stated that demand-driven inflation is the primary concern over supply shocks from the Middle East conflict, as domestic economic recovery is expected to create gradual and persistent upward price pressure. He plans to review export and credit card spending data, along with currency and stock market volatility, before the August 27 meeting.

Despite recent inflation easing in July, policymakers remain cautious about upward pressures, and markets have not ruled out a potential back-to-back rate hike this month. The country's export-driven economy, boosted by chip exports in the AI boom, surpassed expectations in the second quarter, with the strongest growth in nearly six years in the first.

However, Ryoo refrained from specifying the pace or magnitude of further rate increases, noting that the current won exchange rate near 10-month highs could exert significant upward pressure on inflation.