BOK to weigh timing, pace of further rate hikes amid growth, inflation

Seoul, September 10 (Yonhap) -- The Bank of Korea (BOK) announced it would determine the timing and pace of additional interest rate increases, taking into account both domestic and international factors. The central bank's monetary policy report stated that persistent economic growth and inflation surpassing the 2 percent target were anticipated to persist for an extended period.

In July and August, the BOK raised the benchmark interest rate to 3 percent for two consecutive meetings, marking the first back-to-back rate hikes since January 2023, when the bank increased rates seven times in a row from April 2022. Following the last rate-setting meeting, the BOK underscored the necessity of proactive measures to curb inflationary pressures, given that consumer prices were projected to stay above the 2 percent target due to export-led economic expansion and increased household incomes.

The bank reiterated the significance of managing inflationary pressures in light of ongoing uncertainty stemming from prolonged conflicts in the Middle East, as well as the ongoing robust export performance, primarily fueled by the semiconductor sector and the artificial intelligence (AI) infrastructure boom. The BOK emphasized that the key considerations for future actions include the potential impact of renewed military tensions in the Middle East on cost pressures and the extent to which strong export performance might translate into domestic demand and demand-side inflationary pressures.

Furthermore, the central bank will closely monitor financial risks linked to escalating household debt and the foreign exchange market, which could arise from potential shifts in U.S. monetary policy.