US Giant Step, Mortgage Loan Interest Rate 7%... Obama Mentor "Korea Should Raise Rates Further"

UC Berkeley Professor Maurice Obstfeld: "Failure to Curb Inflation Leads to Higher Unemployment and Lower Production"

[Asia Economy Sejong=Reporter Kwon Haeyoung] As the United States continues its strong monetary tightening stance, economic experts have suggested that South Korea should prioritize inflation control for the time being amid concerns over high inflation and economic recession.

According to the Korea Development Institute (KDI) on the 24th, Professor Maurice Obstfeld of UC Berkeley stated at a press conference during the 'G20 Global Financial Stability Conference' held on the 21st, "If South Korea fails to curb inflation and prices continue to rise, it will inevitably have to bear the costs of higher unemployment rates and reduced production in the future." Professor Obstfeld is an economic expert who served as the Chief Economist for Macroeconomics at the White House during former U.S. President Barack Obama's administration and as Chief Economist at the International Monetary Fund (IMF).

He emphasized, "In South Korea's case, the current unemployment rate is low, and the economic growth forecast is not bad, so it can withstand additional interest rate hikes," adding, "Although there may be negative impacts on the economy in the coming quarters, this can be seen as an investment in the future."

Shin Hyun-song, Director of the Research Department at the Bank for International Settlements (BIS), also said on the same day, "Once inflation starts, initially only limited items rise in price, but gradually the number of items expands, and overall economic agents respond, causing other prices to follow in an interactive manner," adding, "The link must be broken." He added, "At this point, it is urgent for the Bank of Korea to control inflation," and "If there is a situation where interest rates need to be raised, it is better to respond proactively rather than delay."

With the U.S. Federal Reserve (Fed) implementing a giant step (a 0.75 percentage point increase in the benchmark interest rate) on the 21st (local time), the Bank of Korea is also highly likely to take an additional big step (a 0.5 percentage point interest rate hike). Due to the domino effect of interest rate hikes by major countries following the U.S. monetary tightening, domestic loan interest rates continue to soar. As of the 23rd, the upper limit of Hana Bank's mixed-type mortgage loan interest rate recorded 6.82%.