Lee Chang-yong, Governor of the Bank of Korea, "It is not the stage to rule out a big step"

President Lee holds first breakfast meeting with Deputy Prime Minister Choo Kyung-ho
Mentions 'big step' of raising base interest rate by 0.5%p

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho is delivering a greeting at a breakfast meeting with Lee Chang-yong, Governor of the Bank of Korea, held on the morning of the 16th at the Press Center in Jung-gu, Seoul. Photo by Hyunmin Kim kimhyun81@

Lee Chang-yong, Governor of the Bank of Korea, stated that it is not entirely possible to rule out a 'big step' of raising the benchmark interest rate by 0.50 percentage points at once in South Korea. This is interpreted as a remark emphasizing the need to accelerate interest rate hikes, given the ongoing tightening monetary policy of the U.S. Federal Reserve (Fed) and the steep inflation trends both domestically and internationally.

On the morning of the 16th, Governor Lee met with reporters immediately after a breakfast meeting with Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho at the Korea Press Center in Jung-gu, Seoul. He said, "From South Korea's perspective, the data is uncertain, so I don't think it is the stage to say that we can completely rule out a big step going forward," adding, "We need to observe a bit more how inflation and growth rates will change before making a judgment."

Regarding whether South Korea could consider an interest rate hike of more than 50 basis points, Governor Lee explained, "Looking at the situation until April, there was no need to consider such a move," and added, "Whether we can consider it going forward depends on a comprehensive assessment of how much inflation will rise, so we need to look at the May Monetary Policy Committee situation and the inflation trends in July and August." Given the unusual inflationary pressures worldwide, including in the U.S., this indicates that the size of the interest rate hike will be decided by considering market conditions.

Deputy Prime Minister Choo and Governor Lee also discussed various issues surrounding the economy and foreign exchange market during their first meeting since taking office. After the meeting, Deputy Prime Minister Choo said, "We will create the best policy mix with the Bank of Korea regarding overall inflation and macroeconomic stability." With the U.S. interest rate hike trend causing increased volatility in the won-dollar exchange rate and domestic inflation, a policy mix combining fiscal policy, monetary policy, and financial policy is expected to be actively pursued going forward.