Monetary, fiscal policies out of sync as BOK hikes rates, gov't boosts spending
Concerns are growing that the country's monetary and fiscal policies are moving out of sync, as the central bank accelerates its tightening cycle while the government pursues an expansionary fiscal policy with next year's budget proposal expected to exceed 800 trillion won ($581 billion), experts said Friday. The Bank of Korea (BOK) on Thursday raised its benchmark interest rate by 0.25…
Experts are sounding the alarm that South Korea's monetary and fiscal policies are becoming increasingly mismatched, with the Bank of Korea (BOK) accelerating its rate hikes while the government plans a significant budget expansion. On Thursday, the BOK increased its benchmark interest rate by 0.25 percentage points to 3%, marking the second consecutive hike since July.
This move was aimed at curbing inflationary pressures. In contrast, the Ministry of Planning and Budget is nearing completion of its next year's budget proposal, which could potentially exceed 800 trillion won ($581 billion). The ministry's initial estimate suggested a spending increase of 10% or more from this year's budget of 729.9 trillion won, signaling a potential first double-digit increase in total expenditures since 2009.
The global financial crisis spurred a 10.9% rise in spending back then. However, the clash between the BOK's tightening monetary policy and the government's expansionary fiscal policy could prove problematic, according to experts.
Written by urgent.news from The Korea Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
