Bank of Korea Governor Shin Hyun-song said on the 1st that "there are few obstacles to adjusting monetary policy in relation to inflation." The remarks are seen as again signaling the possibility of future rate hikes, following the first meeting of the Bank of Korea's monetary policy committee since Shin took office on the 28th.
Shin stated accordingly during a conversation with Isabel Schnabel, a member of the European Central Bank (ECB) Executive Board, at the "BOK International Conference" held that day at the Bank of Korea (BOK) annex. Comparing the economic situations of Korea and the European Union (EU), Shin said, "Korea, like the euro area, is sensitive to energy price shocks," and added, "Dependence on energy imports is high."
However, Shin said Korea differs from Europe in that its economic recovery is gaining traction. Korea's real gross domestic product (GDP) in the first quarter increased 3.6% from a year earlier, and real gross domestic income (GDI) rose 12.3%.
Shin said, "One can see there are few obstacles to adjusting monetary policy in relation to inflation (rising prices)," adding, "The difficulty in conducting monetary policy is when elements are in conflict, but the economy is robust and the output gap (the value obtained by subtracting potential GDP from real GDP) is expected to turn positive next year."
He went on to say, "When you consider housing prices and household debt and take the exchange rate into account, all indicators point in the same direction," adding, "We can operate monetary policy with much greater room to maneuver."
Earlier, the Monetary Policy Board of the Bank of Korea (BOK) kept the benchmark rate unchanged at 2.5% per year on the 28th. At a press briefing afterward, Shin said, "This time, whether you look at prices, growth, the exchange rate, or real estate, the path is relatively clear," adding, "By raising the benchmark rate going forward, it will be an opportunity to manage various factors consistently."