BOK expected to deliver 2nd rate hike to combat inflationary pressure: BOK senior deputy gov.

The outgoing senior deputy governor of the Bank of Korea (BOK) has indicated that another rate hike is highly probable to curb inflation, unless external shocks arise. BOK Senior Deputy Gov. Yoo Sang-dai, a member of the BOK's Monetary Policy Board, stated this during a press conference. He will depart from the central bank next week.

The BOK increased the benchmark rate by 0.25 percentage points to 2.75% in July, the first hike in three and a third years, to tackle mounting inflationary pressure. In June, consumer prices exceeded 3% for two consecutive months, surpassing the BOK's 2% objective.

Current high inflation results from both demand- and supply-side factors, coupled with export-driven economic growth and escalating oil prices due to the ongoing Middle East conflict. Despite Middle East tensions, strong demand-driven inflation is on the rise in a steady manner, driven by solid economic growth.

Yoo pointed out that subsequent economic data, such as the second-quarter GDP growth and July consumer prices, will impact the upcoming monetary policy decision scheduled for August 27. The South Korean economy grew 0.6% in the April-June period, above the BOK's earlier forecast of 0.2% growth. However, consumer prices increased to 2.8% in July, dropping below the 3% mark for the first time in three months, as oil prices stabilize.

For the BOK, the most crucial factors are whether core inflation remains high and if economic growth persists. The central bank aims to respond to economic cycles, minimizing fluctuations and stabilizing inflation.