Bank of Korea (BOK) Governor Rhee Chang-yong repeatedly hinted at further benchmark interest rate hikes on Friday, saying “The central bank’s role as an inflation fighter is becoming important once again.”
“In the short term, the higher the rates go up, the greater the sufferings of the disadvantaged,” said Governor Rhee on the day in his commemorative remarks for the BOK’s 72nd anniversary. “But a mistimed hike can lead to higher inflation causing more widespread damage.”
It is interpreted that even though a rise in interest rates means that households and companies will have a larger interest burden to bear, a pre-emptive measure must be taken to keep a lid on soaring inflation. Second Vice Minister Choi Sang-dae of Economy and Finance also said, “Fiscal projects worth four trillion won, which contribute to price stability will be sorted out for our focused attention.”
“Inflation pressure is projected to build up globally for a significant period,” Rhee said. “In the current situation, when Korea’s consumer price inflation rate exceeds 5 percent and major central banks are accelerating the normalization, I can hardly say that we are moving pre-emptively to curb inflation.” His message may be interpreted that back-to-back rate hikes in July and August are, in fact, unavoidable.
In terms of the central bank’s organizational culture, Rhee urged the members to ensure the effective use of collective intelligence by setting up a culture where everyone can have a say without regard to seniority, and vowed that he will lead the way in eliminating a rigid workplace hierarchy.”