Bank of Korea (BOK) Governor nominee Shin Hyun-song warned that the inflation rate could gradually rise and the gross domestic product (GDP) growth rate could shrink due to the Middle East crisis. He also said future base rate decisions will be made with financial stability and economic growth in mind.
In his opening remarks at a confirmation hearing held by the National Assembly's Strategy and Finance Committee on the 15th, Shin said, "Military tensions in the Middle East remain, and international oil prices are much higher than before the war," and stated accordingly.
Specifically, he said, "Price increases were limited through March, but the inflation rate will gradually rise due to higher oil prices and the exchange rate," adding, "While the semiconductor upturn and an extra budget will partially ease downward pressure, growth will weaken from the initial outlook."
In a revised economic outlook released in Feb., the Bank of Korea (BOK) put this year's inflation rate at 2.2% and the gross domestic product (GDP) growth rate at 2%. But after the Middle East crisis began, some expect inflation to rise to the mid- to high-2% range and growth to fall below 2%.
On financial stability, he said, "We need to continue to monitor the high volatility in the financial and foreign exchange markets, the risk of financial imbalances, and the credit risk in vulnerable areas," adding, "We should also be mindful of the possibility that risks could be amplified as the financial and real institutional sectors interact."
On the direction of base rate management, he said, "Amid high uncertainty in economic conditions, we will pursue price stability and financial stability, which are the BOK's core mandates, and conduct monetary policy so that the economy can grow stably."