September 27, 2022

Bank of Korea announced that going forward to 2022 it will adjust its monetary policy, given a variety of factors that could accelerate inflation. Whilst also suggesting that it will maintain the move to hike the key interest rate.

The central bank in a report laying out its monetary policy direction for 2022 mentioned that it expects that the country’s inflation will run in its 2 percent target range next year. However, it has shown concerns over increasing upward pressure from global supply disruptions and a rebound in consumption.

The BOK in accordance with improvement in economic conditions will appropriately adjust next year’s interest rate in a way that inflation could be stabilized at the target level and the danger from financial imbalance can be eased.

It expects the consumer price growth to be lowered to the 2 percent target level. However, it will continue to be vigilant about the possibility that upward pressure could get stronger than expected.

According to reports, inflation has been cited as a major potential risk to the country’s economy due to ever-rising oil prices, prices of goods and services due to global supply disruptions and a rebound in consumption.

In November, the country’s consumer prices rose 3.7 percent from a year earlier, turning out to be the fastest rise in about 10 years.

The Bank of Korea last month in order to control inflation and household debt had raised its key interest rate by a percentage point to 1 percent. Thus ending around two years of the zero range borrowing cost that was put in place to boost the pandemic-hit economy.

The central bank earlier in November also revised up its consumer growth forecast to 2.3 percent from 2.1 percent that was projected three months earlier. Next year, it expects the prices to rise 2 percent, higher than the previous 1.5 percent growth.

Lastly, BOK Gov. Lee Ju-yeol commented that the monetary policy remains accommodative, while hinting at the possibility of further rate hikes early next month.

The central bank’s next rate-setting meeting is currently scheduled for Jan. 14.