Seoul:The Bank of Korea (BOK) Governor, Shin Hyun-song, stated that the central bank's decision to implement consecutive interest rate hikes has provided additional time to address potential financial risks. This strategic move was discussed during a parliamentary audit at the BOK headquarters.
According to Yonhap News Agency, Shin explained that the BOK increased the benchmark interest rate to 3 percent during meetings in July and August. This proactive approach aimed to mitigate accelerating inflationary pressures. Shin emphasized the importance of addressing issues promptly, referring to a Korean proverb similar to "A stitch in time saves nine."
The governor described these back-to-back rate hikes as "unprecedented," signaling the market effectively and allowing financial authorities to respond to potential fluctuations preemptively. He noted that Korean government bond yields have remained stable in recent weeks, indicating market stabilization despite the challenges of increased rates.
Shin also addressed concerns about the rising costs of overseas artificial intelligence (AI) service subscriptions. The BOK is working on methods to incorporate accurate data into national statistics, as the current account data does not specifically break down AI subscription fees from software copyright-related payments.
In a report to the National Assembly, the BOK projected continued solid growth for the South Korean economy, driven by strong semiconductor exports. These exports are expected to positively influence the broader economy and consumer spending. The BOK adjusted its growth forecasts to 3.3 percent for 2026 and 2.9 percent for 2027 due to the ongoing semiconductor upcycle.
The report also highlighted that consumer prices are anticipated to stay above the 2 percent target, supported by strong exports and investments. Core inflation, excluding energy and food prices, rose nearly 3 percent recently due to supply chain issues linked to the Middle East crisis. The BOK plans to monitor inflation and economic trends closely to determine future rate hikes, with the next rate-setting meeting scheduled for October 22.