Commissioners of the Bank of Korea's monetary policy committee (Monetary Policy Board), which held the base rate steady for the seventh straight meeting, said with one voice that the magnitude of the Middle East war's impact on prices and growth is uncertain. They said it would not be too late to decide whether to raise or cut rates after watching developments in the Middle East and the trajectory of Korea's economic growth.
According to the minutes of the seventh meeting of the Bank of Korea's monetary policy committee released on the 28th, the Monetary Policy Board on the 10th kept the base rate at 2.5% per year by unanimous vote of the six monetary policy commissioners, including then-Bank of Korea Governor Rhee Chang-yong.
Commissioners voiced concern in unison about uncertainty from the fallout of the U.S.-Iran war. One Commissioner said, "A surge in international oil prices and a rise in the exchange rate due to the Middle East war will act as a supply shock to the domestic economy, simultaneously increasing downside pressure on growth, upside pressure on prices, and financial market volatility," adding, "Uncertainty is very high regarding the duration and scope of the Middle East situation and its impact on domestic prices and growth."
Another Commissioner said, "A supply shock has negative effects on both growth and prices, making policy responses very difficult, and it is hard to gauge which side will be affected more," adding, "For now, it is desirable to watch in a wait-and-see posture along with measures to cushion the supply shock."
There were also views that the financial and dwellings markets are not positive. One Commissioner said, "Government Bonds yields have risen sharply and the momentum for stock price gains has deteriorated," adding, "Credit spreads have widened slightly, and in a widening phase the pace tends to accelerate, so the trend needs close monitoring." The Commissioner added, "Although the rate of increase in dwelling prices in the Seoul metropolitan area has slowed, it is premature to say the market has entered a stable phase."
Although the won's exchange rate against the U.S. dollar (won-dollar rate) has risen, there were also arguments that it is not at a worrisome level. One Commissioner said, "The won-dollar rate rose due to the Middle East war and foreign investors pulling out funds from domestic stocks," adding, "Considering external net financial worth and other factors, it is assessed that there is no problem in managing external credibility."