<금통위> "Inflation Rate to Stay in the 5% Range for the Time Being... Monetary Policy to Focus on Inflation Control"

Lee Chang-yong, Governor of the Bank of Korea, is presiding over the Monetary Policy Committee plenary meeting held on the 26th at the Bank of Korea in Jung-gu, Seoul. Photo by Joint Press Corps

[Asia Economy Reporter Seo So-jeong] The Monetary Policy Committee of the Bank of Korea forecasted that the consumer price inflation rate will remain in the 5% range for the time being and raised the base interest rate by 0.25 percentage points from the existing 1.5% to 1.75%. Given the strong inflationary trend, monetary policy will be operated with a greater focus on inflation for the time being.

In the resolution of the monetary policy direction meeting held on the morning of the 26th, the committee stated, "Consumer prices are expected to continue a high rise in the 5% range for the time being, and the inflation rate for this year is expected to be in the mid-4% range, significantly exceeding the February forecast (3.1%)." The core inflation rate is also expected to rise to the low 3% range this year.

Regarding the domestic economy, it said, "Although the growth rate of exports will slow due to the global economic slowdown, the recovery trend will continue supported by improvements in private consumption," but forecasted that "the gross domestic product (GDP) growth rate is expected to be in the high 2% range, slightly below the February forecast (3.0%)."

In the revised economic outlook announced on the same day, the Bank of Korea lowered this year's growth forecast from 3.0% to 2.7% and raised the consumer price inflation forecast from 3.1% to 4.5%.

The Monetary Policy Committee emphasized, "Although uncertainties in domestic and external conditions remain, the domestic economy is expected to continue its recovery trend and inflation is expected to exceed the target level for a considerable period," adding, "It is necessary to operate monetary policy with a greater focus on inflation for the time being."

It added, "In this process, the timing of any additional adjustment to the degree of easing will be determined by closely examining the trends in growth and inflation, the accumulated risks of financial imbalances, changes in major countries' monetary policies, and overseas economic conditions including geopolitical risks."