Free Trial

MNI BOK WATCH: Restrictive Stance, But Concerns Over Growth

(MNI) Tokyo

Bank of Korea Governor Rhee Chang-yong on Thursday maintained a hawkish stance amid stubborn inflation, but refrained from flagging any near-term rate cut despite highlighting concerns over South Korea's slowing economy.

The BOK on Thursday as expected decided unanimously to keep its policy interest rate unchanged at 3.50% for the sixth consecutive meeting. While inflation remains above-target, exports are slowing due to lower global demand for tech goods. (See MNI BOK WATCH: Pause At 3.5% Expected As Economy Slows)

Rhee said the Board judged it appropriate to leave the Base Rate unchanged at its current restrictive level "and assess the changes in domestic and external policy conditions going forward.”

“The Board will thoroughly assess the slowdown of inflation, financial stability risks, economic downside risks, household debt growth, monetary policy changes in major countries, and developments in the Israel-Hamas conflict," he said.

The governor said the Board deemed maintaining a restrictive policy stance for a considerable time warranted. The BOK would judge whether the Base Rate needs to rise further, he added.

The BOK is expected to keep the policy rate unchanged for the rest of this year and at least for the first quarter of 2024. A move to lower the rate could weaken the won and put upward pressure on inflation.


“Inflationary pressures have increased more than originally expected, and accordingly the timing of inflation converging on the target level is more likely to be delayed than previously forecast,” Rhee noted

The consumer price index rose 3.7% y/y in September, up from 3.4% in August, the highest level since April when it also added 3.7%. September core CPI gained 3.8% y/y, slowing from 3.9% in August.

Rhee added the bank expects the pace of the inflation slowdown to moderate more than previously expected and that the BOK will monitor household debt growth. Uncertainty regarding the future path of inflation and growth have risen significantly due to the restrictive monetary policy stances in major countries and heightened geopolitical risks.

The BOK will next meet Nov 30

MNI Tokyo Bureau | +81 90-2175-0040 |
MNI Tokyo Bureau | +81 90-2175-0040 |

To read the full story



MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.