SEOUL– Multiple members of the central bank’s rate-setting board cited inflation as one of the largest risks that could hamstring South Korea’s economic recovery when they voted for a rate hike last month, minutes from the latest policy meeting showed Tuesday.
The monetary policy board of the Bank of Korea raised the key interest rate by a quarter percentage point to 1 percent in its policy meeting held on Nov. 25. The rate hike followed a 0.25 percentage point rise in August and marked the end of about two years of the zero range rate put in place to bolster the pandemic-hit economy.
The rate hike decision was not unanimous, with one board member calling for a freeze.
The minutes showed that most members cited inflation as a penitential major risk to the economy, underlining the need for a rate hike to rein in rising price levels.
“The consumer inflation has exceeded our bank’s target since April … and temporary, economic and cyclical factors are coexisting, raising the uncertainty over the future trajectory of prices,” a board member said. “It appears that prices will be on the rise for a considerable period of time.”
Another board member called for a rate hike, saying that the priority should be placed on tackling the looming inflation risk and excessive liquidity in the market.
According to government data, the country’s consumer prices grew 3.7 percent in November from a year earlier, the fastest rise in about 10 years. The BOK’s mid-term inflation target is 2 percent.
After announcing a rate hike last month, BOK Gov. Lee Ju-yeol said that the monetary stance still remains “accommodative” and hinted at the possibility of yet another increase in the coming months.
Meanwhile, the minutes showed that one board member voiced dissenting views, saying that despite the overall rise in inflation, the core inflation that excludes volatile food and oil prices stays relatively low, and called for a freeze until the impact of the August hike is fully analyzed.
“A process is needed to monitor the ripple effect of a rate hike in August,” the member said. “Considering the resurgence of (COVID-19) infections and still high uncertainty over domestic demand recovery, it does not appear urgent to push for an additional rate increase.”
Source: Yonhap News Agency