On the 16th, Bank of Korea (BOK) Governor Shin Hyun-song, when asked about the possibility of an additional base rate hike, said, "We will keep all possibilities open." the Bank of Korea's monetary policy committee raised the rate that day from 2.5% to 2.75% a year and said it could go higher. That was because the recent consumer price inflation topped 3%, far exceeding the BOK's inflation target of 2%, and because there is a need to narrow the rate gap with the United States to stabilize the won-dollar exchange rate downward.
After raising the base rate that day, Governor Shin received a question at a press conference asking, "Are you keeping open the possibility of consecutive rate hikes?" That was because, in the monetary policy direction released after the rate decision, the BOK said, "It is judged necessary to continue the stance of future rate hikes." He added, "We will decide the timing and pace of any additional (rate) hikes while assessing the degree of inflationary pressure, the trend of economic improvement, and financial stability conditions."
Governor Shin said, "Because the data to come is extremely important, we cannot make a definitive statement in either direction," but added, "In upcoming meetings, we will keep all possibilities open. We will place weight on various (economic) indicators (to be released)." Governor Shin said, "We will look very carefully at second-quarter national income to be released next week." He added, "We will also look carefully at July inflation."
In addition, before the Q&A, while explaining the background to the rate hike decision, Governor Shin said, "In carrying out currency policy, we will respond until we can be confidently assured that the inflation growth rate has reached the target level," and added, "How proactively we respond will be decided after reviewing the data to be obtained going forward."
It has been four years since July 2022 that the BOK mentioned the "pace" of rate hikes in its monetary policy direction. At that time, the BOK took a so-called big step, raising the rate by 0.5 percentage point at once (1.75%→2.25%) for the first time since its founding. After that, through four meetings until Jan. 2023, it raised the rate to 3.5%. That was because, during COVID-19, major countries pursued expansionary fiscal policy and rate cuts, flooding markets with money and sending inflation soaring. As the United States moved first with steep rate hikes, the rate gap with Korea widened and the exchange rate also rose.
At that time, the BOK said in its monetary policy direction, "The magnitude and pace of future rate hikes will be judged after closely reviewing growth and inflation trends, accumulated risks from financial imbalances, changes in major countries' currency policies, and overseas economic conditions including geopolitical risks."