Bank of Korea (BOK) Gov. Rhee Chang-yong said Friday that South Korea's inflation is expected to make steady progress toward its 2 percent target, although global oil prices will remain one of the key uncertainties for consumer prices.
"South Korea's inflation is expected to reach the low 3 percent level by the end of this year, eventually heading towards the bank's target of 2 percent throughout 2024," Rhee said during a meeting with reporters in Marrakesh, western Morocco.
Rhee was visiting the North African country to take part in the annual meetings of the International Monetary Fund and the World Bank that kicked off in the city Monday.
South Korea's on-year consumer prices accelerated by the most in five months in September, rising 3.7 percent on-year, driven by higher oil costs and rising prices of some farm goods.
In August, consumer prices increased 3.4 percent on-year, accelerating from the 2.3 percent growth tallied in July.
"It is true that (September's) 3.7 percent growth exceeded our expectations," Rhee said. "Our primary concern revolves around the extent to which core inflation aligns with our expectations amid volatile oil prices."
The governor added the bank is also closely monitoring foreign exchange rates against the greenback in light of market speculation that the United States will continue its monetary tightening policy and pursue another interest rate hike.
"If the U.S. does implement another rate hike, there may be some price impacts, but these would align with market expectations," Rhee said.
Touching on economic growth, Rhee said South Korea is expected to have more room for expansion despite the growing concerns over the aging population.
"It would be overly pessimistic to assume that South Korea's economic growth will stagnate like Japan," Rhee said, emphasizing that the nation would encounter sluggish growth only if it failed to take action.
The governor said South Korea can still achieve growth of more than 2 percent despite such challenges through structural reform in the labor sector, and by utilizing female and immigrant workers.
Rhee pointed out that concerns over slowing economic growth should not be approached by increased expenditures but through structural reforms.
"Business leaders assert that their operations are more affected by the shortage of labor forces rather than heightened borrowing costs. These issues cannot be remedied through financial means," Rhee added.
Concerning the escalating Israel-Hamas conflict, Rhee said it is currently too early to assess its impact on the financial market.
Source: Yonhap News Agency