Lee Chang-yong "Rate hike trend not over... 3.75% possible with 5 Monetary Policy Committee members"

Minority Opinion by Committee Member Jo Yoon-je on 0.25%P Increase This Month

Lee Chang-yong, Governor of the Bank of Korea, is striking the gavel at the regular Monetary Policy Committee meeting held at the Bank of Korea in Jung-gu, Seoul on the 23rd. Photo by Joint Press Corps

[Asia Economy Reporter Seo So-jeong] Lee Chang-yong, Governor of the Bank of Korea, emphasized once again on the 23rd that the decision to keep the base interest rate unchanged should not be interpreted as the end of the rate hike trend. Governor Lee indicated the possibility of further rate hikes by stating that one Monetary Policy Committee member supported maintaining the current rate of 3.5%, while five members were open to raising it to 3.75%.

In his opening remarks at the press conference held immediately after the Monetary Policy Committee's meeting to decide the monetary policy direction, where the base rate was held at 3.5%, Governor Lee said, "I want to emphasize once again that the decision to hold the base rate after consecutive hikes at every meeting since April last year was made considering unprecedented high uncertainty."

Governor Lee explained, "I hope this decision to hold the base rate is not interpreted as 'the end of the rate hike trend.' Last year, inflation surged unusually, leading to rate hikes at every meeting, but before that, it was common to review the need for additional hikes after some time following an increase." He implied that this decision should be understood as a return to the usual approach of the past.

As the basis for holding the base rate, Governor Lee stated, "Although the inflation rate is expected to gradually slow down, the upward trend exceeding the annual target level is expected to continue, and given the high uncertainty in policy conditions, it is appropriate to maintain the base rate at the current level while closely monitoring various uncertainty factors, such as the pace of inflation slowdown, the terminal rate level of the U.S. Federal Reserve (Fed), the impact of China's economic recovery on the domestic economy, the financial stability effects of the real estate market, and the transmission effects of past rate hikes." However, Monetary Policy Committee member Cho Yoon-je expressed a minority opinion that it would be desirable to raise the base rate by 0.25 percentage points.

Regarding future monetary policy operations, Governor Lee said, "Even if future inflation trends align with current forecasts, the upward trend exceeding the target level is expected to continue throughout the year, so we will maintain a tightening stance for a considerable period and assess the need for additional hikes." He added, "In this process, we will carefully monitor the development and impact of uncertainty factors and conduct monetary policy with precision."