Bank of Korea Governor Shin Hyeon-song said on the 12th that "monetary policy is bound to face trade-offs among policy variables, but the trade-offs are not large now," adding, "We need to focus on price stability and raise rates without delay." At a press briefing after the May meeting of the the Bank of Korea's monetary policy committee, he mentioned the "appropriate timing," but this time he stressed that it must not be late. It is interpreted as meaning that rates could be raised as early as July.
Shin stated accordingly at a ceremony marking the 72nd anniversary of the bank's founding held at the Bank of Korea in Seoul on the day. He said, "Growth, prices, and financial stability are pointing in a relatively clear single direction from a monetary policy perspective," adding, "Data obtained after the May monetary policy decision meeting confirm this." It is interpreted as meaning there is little burden to raising rates to rein in prices, as strong semiconductor exports are driving economic growth.
Real gross domestic product (GDP) in the first quarter rose 1.8% from the previous quarter, the highest in 5 years and 6 months since the third quarter of 2020 (2.2%). Nominal GDP, excluding price changes, grew 17.1% from a year earlier. It is the highest in about 30 years since the third quarter of 1995 (19.2%).
Prices, meanwhile, are on the rise. Shin expected the inflation rate to remain above the target for a considerable period. According to the Ministry of Data and Statistics (MODS), the consumer price index in May rose 3.1% from a year earlier. It is the biggest increase in 2 years and 2 months since March 2024 (3.1%). Core inflation, which excludes food and energy, rose 2.5%.
Shin acknowledged that a rate hike would inevitably increase the debt repayment burden on vulnerable groups and low- and middle-income people. He said, "Monetary policy affects the market indiscriminately," adding, "Targeted support for these difficulties is more effective through fiscal policy."
Shin was somewhat optimistic about the won-dollar exchange rate. He said, "In the market, a large current account surplus is seen as increasing demand for the won through corporate tax payments and expanded domestic investment, so the exchange rate is also expected to stabilize gradually."
Shin said, "It is important to expand investment to enhance future growth potential based on increased fiscal capacity and corporations' financial conditions," adding, "We must also continue efforts to alleviate polarization across regions, generations, and classes."