The Monetary Policy Committee Lowers Next Year's Growth Forecast: "Inflation Expected to Exceed Target for an Extended Period... Tightening Stance Maintained"

Revised Economic Outlook Lowers Next Year's Growth Rate by 0.1%p
"Inflation Rate Fluctuates Around 3% Until Year-End"
"High Uncertainty in China's Economy and IT Sector Rebound"

The Monetary Policy Committee of the Bank of Korea decided on the 24th to keep the base interest rate steady at 3.5% per annum, stating that "although the inflation rate continues to slow down, it is expected to exceed the target level for a considerable period, rising again to around 3% after August." The committee explained, "Given the increased uncertainty regarding major countries' monetary policies and economic conditions, as well as the need to carefully monitor household debt trends, it is deemed appropriate to maintain the current tightening stance." Due to heightened economic uncertainty, the growth rate forecast for next year was lowered by 0.1 percentage points.

In the morning statement on monetary policy direction, the Bank of Korea's Monetary Policy Committee said, "The global economy is expected to continue its slowing growth trend due to the impact of higher interest rates and a weakening recovery in China," adding, "The necessity for further rate hikes will be assessed while reviewing changes in domestic and international policy conditions."

The economic growth forecast for this year was maintained at 1.4%, but the forecast for next year was lowered. The committee explained, "This year's growth rate is expected to be 1.4%, in line with the forecast made in May. However, there remains high uncertainty regarding the future growth path, including the direction of the Chinese economy and its domestic ripple effects, the economic trends of major advanced countries, and the timing of the IT sector's recovery."

This year's consumer price inflation rate is expected to align with the May forecast of 3.5%, but the core inflation rate is projected to slightly exceed the previous forecast of 3.3%, reaching 3.4%. The committee stated, "Core inflation will continue a gradual slowing trend, but the annual inflation rate this year will be influenced by accumulated cost pressures," adding, "Consumer price inflation is expected to rise again from August and fluctuate around 3% until the end of the year."

The committee noted, "While the domestic economy is gradually improving, inflation is expected to exceed the target level for a considerable period, and policy uncertainties remain high," emphasizing, "We will focus on price stability and maintain a tightening stance for a considerable period while assessing the need for additional rate hikes."

Meanwhile, the committee kept the base interest rate at 3.5% and revised the real gross domestic product (GDP) growth forecast for next year down from 2.3% to 2.2%. The consumer price inflation forecast, currently at 3.5%, was maintained as is.

Bank of Korea Governor Lee Chang-yong is presiding over the Monetary Policy Committee meeting held at the Bank of Korea in Jung-gu, Seoul, on the morning of the 24th. / Photo by Joint Press Corps