Bank of Korea Governor Shin Hyun-song said on the 9th, "Given inflation running above the target level, improving growth, and rising financial stability risks, it is necessary to raise the base rate at an appropriate time." With strong semiconductor exports delivering high economic growth, the point is that rates could be raised to tame prices. Since the first meeting of the the Bank of Korea's monetary policy committee (Monetary Policy Board) in May after taking office, Shin has repeatedly stressed the need to raise rates.
Shin appeared at a special session of the National Assembly's Finance and Economy Planning Committee that day and cited inflation as one reason for the need to raise rates. Shin said, "Looking ahead, despite easing tensions in the Middle East, the pass-through of elevated expense increases so far will persist for some time, and as demand-side pressure grows, the rate of increase is expected to remain high for a considerable period."
The consumer price index rose 3.2% in June, above the Bank of Korea's 2% target. It was around 2% in January–February, but has exceeded 3% since May, after the war in the Middle East broke out.
Shin said the price increases in the first half of the year stemmed from the Middle East war, but going forward the causes will be income and asset expansion. Large semiconductor companies such as Samsung Electronics and SK hynix paid hefty performance bonuses, and the sharp rise in the Korea Composite Stock Price Index (KOSPI) has increased asset size. When consumers' incomes rise and they spend more, prices tend to go up.
Shin said, "In the first half, the pace of consumer price increases widened significantly due to higher international oil prices," adding, "Looking ahead, despite easing tensions in the Middle East, the pass-through of elevated expense increases so far will persist for some time, and as demand-side pressure grows, the rate of increase is expected to remain high for a considerable period."
In a business report submitted to the National Assembly that day, the Bank of Korea said, "The base rate has been kept around 2.5% since the second half of last year, but going forward it is judged necessary to raise the base rate at an appropriate time."
At a press conference after the Monetary Policy Board meeting in May, Shin also said, "It is necessary to raise rates at an appropriate time." In a commemorative address for the Bank of Korea's founding on the 12th of last month, he said, "With a focus on price stability, it is necessary to raise rates without delay," and on the 17th of the same month, he said, "We will respond proactively to price stability."