Bank of Korea Governor Shin Hyun-song said on the 29th, "I judge that it is necessary to continue the rate-hike stance going forward," adding, "We plan to decide the timing and pace of additional hikes after reviewing the degree of inflationary pressure, the trend of economic improvement, and financial stability conditions."
Shin stated accordingly at a National Assembly Strategy and Finance Committee briefing on government affairs. Shin cited prices as the reason for the need to raise rates. Shin said, "Prices are expected to continue rising above the target for a considerable period as the impact of elevated expense and the exchange rate persists and demand-side pressures expand gradually with income improvements."
The Bank of Korea also said in the statement on the direction of currency policy by the Bank of Korea's monetary policy committee on the 16th that "it is judged necessary to continue the rate-hike stance." The Bank of Korea raised the rate by 0.25 percentage point from 2.5% to 2.75% per year for the first time in three years and six months, signaling additional hikes.
At a press conference, Shin said he would closely watch the economic growth rate and inflation rate in relation to the timing of additional rate hikes. Shin said, "We will give weight to a range of indicators to come," and "We will keep all possibilities open."
Among the indicators Shin emphasized, the economic growth rate was at a high level. Second-quarter real gross domestic product (GDP) grew 0.6% from the previous quarter, triple the 0.2% forecast. Real gross domestic income (GDI) rose 15.6% from a year earlier, the highest since the first quarter of 1988 (16.4%). GDP means how much was produced, and GDI means how much was earned through that.
Shin cited high volatility in the financial and foreign exchange markets as a risk factor. The won-dollar exchange rate against the U.S. dollar surged into the 1,550-won range by the end of June but fell to the 1,460–1,470-won level in July. The KOSPI index climbed to 9,385.59 on June 19, but was in the 5,600s at around 11:10 a.m. that day.
Shin said the semiconductor "supercycle" is likely to continue for the time being. Shin said, "The favorable semiconductor cycle will continue, and as its impact gradually spreads to other institutional sector, solid growth is expected to persist."