The Financial Monetary Commission (KFTC) held a meeting at the Bank of Korea’s main building in Jung-gu, Seoul on the 25th and decided to operate the standard interest rate at 2.50%annually, up 0.25%p from the previous. This raised the base rate four consecutive times.
Lee Chang-yong, president of the Bank of Korea, at the press conference immediately after the meeting, The current economic situation is not much different from the domestic price and growth flow expected in July. The expectation of the predicted market is reasonable. It suggests that an additional increase will continue once or twice.
■ Price 5 ~ 6%rising pressure continues to rise… Maintain interest rate hikes
The governor said, In order to spread inflation expectations due to inflation and to prevent the high price, it is necessary to continue to raise interest rates for the time being.
However, the possibility of ‘Big Step (0.50%p increase)’ said, If the shock comes, it can be considered in principle, but it is not considered in this situation.
The governor said, As the inflation pressure continued, the consumer inflation rate was 6%for two consecutive months, and the source inflation continued around 4%.
In particular, Lee said, In the past two months, the price of international oil prices is likely to be lower than in July, but the international energy price flow caused by the Ukrainian crisis has a high uncertainty and origin. Considering the rise in prices, the high consumer prices of 5-6%are expected to continue until early next year.
■ exchange rate volatility uncertainty, but it is different from the foreign exchange and financial crisis
Lee also said that the recent increase in exchange rate volatility is whether there is no tension on exchange rate movements, and how negative impacts can affect our economy, and whether the Bank of Korea has such a negative impact, as the government did at the recent macro stability inspection meeting. Of course, it’s true that I have to monitor.
He said, The uncertainty is very great, such as how the US will raise interest rates, how much China’s stimulus policy will be, and what Europe will change in winter.
However, Lee said, There is a lack of foreign exchange reserves, so there is a concern that there is a possibility that the situation is likely to be repeated in 1997 or 2008. It can be clear that the danger is not the same as before.
■ This year’s economic growth rate is 2.6%down 0.1%p… Next year, 2.1%forecast
Regarding the future economic outlook, Lee said, If you look at the domestic economy, it is still recovering from the improvement of consumption, but the downside risk has been greater than before, as the export growth has slowed due to the weakening of major countries.
Lee said, The growth rate is expected to be 2.7%at 2.6%during this year, and it is expected to lower the previous forecast of 2.7%. The result is a reflection.
Lee Chang-yong said, We expect growth rate to 2.1%next year. The growth rate is expected to be 2.1% on average.
■ Greater concern for slowing the global economy
Lee said, The global economy has been prolonged in the Ukrainian crisis and a significant increase in policy rates, as the Ukrainian crisis continues with high inflation of 8% to 10% in major developed countries.
The US has grown negative for two consecutive quarters due to a decrease in investment, and the economic sentiment has worsened due to poor consumption of goods in Europe, he said.