BOK chief signals hawkish stance amid outlook for higher growth, rates

Bank of Korea Governor Shin Hyun-song, speaking on Friday, indicated the central bank will adapt its monetary policy to a future scenario featuring higher economic growth and interest rates, suggesting it will adopt a more aggressive stance for an extended period. Responding to a query from Democratic Party legislator Kim Tae-nyeon during a parliamentary audit at the National Assembly, Shin concurred with the view that reverting to the ultra-low interest rate era would prove challenging.

"We will execute policies effectively in preparation for the prospect of a future environment characterized by high growth and high interest rates," he affirmed. The central bank has embraced a more assertive approach in recent months, driven by escalating inflation and robust economic expansion. In July and August, it increased the benchmark interest rate to 3 percent, marking the first consecutive rate hikes since January 2023, with the January 2023 hike being the seventh consecutive rate increase in a tightening cycle that commenced in April 2022.

Over the 3.5-year period, the rate had been progressively reduced from 3.5 percent to 2.5 percent before the latest round of adjustments.