Bank of Korea (BOK) Governor Lee Ju-yeol yesterday said interest rates are still accommodative after two hikes since August, suggesting further tightening is in the pipeline as inflation risks mount in the recovering economy.
The board considered the price pressures building in the economy and financial imbalances when it decided to raise rates by 25 basis points to 1 percent, Lee told a press briefing.
The central bank revised up its inflation outlook to 2.3 percent for this year and 2 percent for next year, expecting price gains would exceed, or at least hover around, its target through next year.
Photo: AP
It also forecast GDP unchanged at 4 percent growth for this year and 3 percent for next year.
“With this hike, the policy rate is still below the neutral level, the real rate is still negative, and there’s plenty of liquidity,” Lee said. “It’s natural that we normalize the rate, which has been excessively low, as the economy recovers.”
Bond yields fell and futures rose following the decision, as the governor failed to commit to a firm date for the next hike.
One of the central bank’s seven policy members dissented from the decision and called for rates to remain unchanged, largely in line with market expectations of the likely voting pattern.
“Concerns that this meeting will be a hawkish hike seems to have eased, as Lee said the timing of the next rate increase will depend on the economy and didn’t specify a timing,” Shinyoung Securities Co fixed-income strategist Cho Yong-gu said.
Central banks worldwide are grappling with price pressures that threaten to destabilize their economies’ recovery from the COVID-19 pandemic.
New Zealand on Wednesday signaled aggressive tightening ahead after hiking for the second time in two months, while surging US prices are pressuring the US Federal Reserve to pivot more quickly to tightening.
Lee referred to global supply bottlenecks and rising inflation expectations among the public as factors that could fuel further price gains in the economy.
The Fed’s policy moves will be an important consideration for the BOK, but domestic conditions will take priority, he said.
However, adding to uncertainty is South Korea’s COVID-19 situation: The number of daily cases reached a new record this month, as the government loosened restrictions.
In addition, while exports have so far benefited from a pandemic-era boom in tech demand, a normalization of that trend could see trade become less of a support to growth.
Lee now has two more decisions before he steps down in March next year.
Hypermarket chain Carrefour Taiwan and upscale supermarket chain Mia C’bon on Saturday announced the suspension of their partnership with Jkopay Co (街口支付), one of Taiwan’s largest digital payment providers, amid a lawsuit involving its parent company. Carrefour and Mia C’bon said they would notify customers once Jkopay services are reinstated. The two retailers joined an array of other firms in suspending their partnerships with Jkopay. On Friday night, popular beverage chain TP Tea (茶湯會) also suspended its use of the platform, urging customers to opt for alternative payment methods. Another drinks brand, Guiji (龜記), on Friday said that it is up to individual
UNCERTAINTIES: Exports surged 34.1% and private investment grew 7.03% to outpace expectations in the first half, although US tariffs could stall momentum The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday raised its GDP growth forecast to 3.05 percent this year on a robust first-half performance, but warned that US tariff threats and external uncertainty could stall momentum in the second half of the year. “The first half proved exceptionally strong, allowing room for optimism,” CIER president Lien Hsien-ming (連賢明) said. “But the growth momentum may slow moving forward due to US tariffs.” The tariff threat poses definite downside risks, although the scale of the impact remains unclear given the unpredictability of US President Donald Trump’s policies, Lien said. Despite the headwinds, Taiwan is likely
READY TO BUY: Shortly after Nvidia announced the approval, Chinese firms scrambled to order the H20 GPUs, which the company must send to the US government for approval Nvidia Corp chief executive officer Jensen Huang (黃仁勳) late on Monday said the technology giant has won approval from US President Donald Trump’s administration to sell its advanced H20 graphics processing units (GPUs) used to develop artificial intelligence (AI) to China. The news came in a company blog post late on Monday and Huang also spoke about the coup on China’s state-run China Global Television Network in remarks shown on X. “The US government has assured Nvidia that licenses will be granted, and Nvidia hopes to start deliveries soon,” the post said. “Today, I’m announcing that the US government has approved for us
The National Stabilization Fund (NSF, 國安基金) is to continue supporting local shares, as uncertainties in international politics and the economy could affect Taiwanese industries’ global deployment and corporate profits, as well as affect stock movement and investor confidence, the Ministry of Finance said in a statement yesterday. The NT$500 billion (US$17.1 billion) fund would remain active in the stock market as the US’ tariff measures have not yet been fully finalized, which would drive international capital flows and global supply chain restructuring, the ministry said after the a meeting of the fund’s steering committee. Along with ongoing geopolitical risks and an unfavorable
RSS