Bank of Korea Governor Shin Hyun-song said on Friday that the central bank will adjust its monetary policy to adapt to an environment of higher economic growth and higher interest rates in the future, signaling that the bank will maintain a "hawkish" stance for some time.
During an audit at the South Korean National Assembly, in response to questions raised by lawmakers from the ruling Democratic Party, Shin agreed with the view that the economy is unlikely to return to an era of ultra-low interest rates. "We will effectively implement our policies to prepare for a possible future environment of higher growth and higher rates," he said.
Against the backdrop of rising inflation and solid economic growth, the Bank of Korea has taken a more hawkish stance in recent months. It raised rates twice in a row at its July and August meetings to 3%, the first back-to-back hikes since January 2023.
At its latest rate decision meeting on Thursday, the Bank of Korea kept rates unchanged, but stressed that the decision represented only a "pause" in its tightening cycle, not a shift in its hawkish stance. The bank noted that rising oil prices, renewed uncertainty in the Middle East, and a better-than-expected economic recovery have all created inflationary pressure.
Shin also said that driven by strong exports related to artificial intelligence (AI), South Korea's economy is expected to grow by more than 3% this year and next. "I cannot give a specific number (for this year's growth forecast)," he said, noting that the OECD has raised its 2026 growth forecast for South Korea to 3.7%.
The Bank of Korea raised its 2026 economic growth forecast for South Korea from 2.6% to 3.3% in August, and is expected to raise the forecast again at its next meeting in November.
Comments