Board member Hwang Geon-il cast sole dissenting vote for freeze

Inflation expected to ease from fourth quarter

Won's appreciation reduces pressure for restrictive policy

Demand-side price trend needs more time to assess

Bank of Korea Governor Shin Hyun-song gavels open the Monetary Policy Board meeting at the central bank's headquarters in Jung-gu, Seoul, on Aug. 27. [Yonhap]
Bank of Korea Governor Shin Hyun-song gavels open the Monetary Policy Board meeting at the central bank's headquarters in Jung-gu, Seoul, on Aug. 27. [Yonhap]

When the Bank of Korea's Monetary Policy Board raised the benchmark interest rate by 25 basis points to 3 percent on Aug. 27 — a consecutive hike — the sole dissenting voice belonged to board member Hwang Geon-il, who argued the central bank should wait to confirm whether demand-driven inflation was truly entrenched before acting.

Minutes of the 16th Monetary Policy Board meeting of 2026, released by the BOK on Tuesday, show that six of the seven board members voted to raise the benchmark interest rate to 3 percent, while Hwang called for holding it at the existing level of 2.75 percent. The minutes record that Hwang "clearly expressed his opposition to raising the benchmark interest rate by 0.25 percentage point."

Hwang's first argument for a freeze was that inflation would gradually ease starting in the fourth quarter. "Prices will remain elevated above the target for now, but are expected to gradually slow from the fourth quarter," he said.

He also pointed to a shift in exchange rate conditions. "The significant appreciation of the won has eased the burden of needing a restrictive monetary policy to counter a high exchange rate," Hwang said. The won-dollar rate had quickly fallen back to the late 1,300 won range, he noted, weakening the case for a rate hike to defend the currency.

Hwang added that "amid the recent trend of the exchange rate stabilizing downward, there is a need to further confirm and examine whether the demand-driven rise in prices is structural." He argued it was not too late to respond after determining whether demand-led inflation was temporary or persistent. He also cited external uncertainties, including whether tensions in the Middle East would ease and the possibility that the semiconductor cycle had peaked.

The six members who voted for the hike, by contrast, emphasized the need for a preemptive response to inflation.

One member said: "As demand pressures accumulate, core inflation is likely to continue rising above the mid-2 percent range for some time, and headline figures have also exceeded the 2 percent target for a considerable period. Despite the start of a rate-hike cycle, liquidity in the broader market still shows a high rate of growth." The member added it was "desirable to raise the benchmark interest rate to preemptively address inflationary pressures, in order to contain the spread of price increases and prevent inflation expectations from becoming entrenched."

Another member said that "by implementing a preemptive policy response to price stability during a period of relatively favorable financial conditions and solid growth, we can ultimately mitigate the negative impact on growth."

The board said it would "carefully monitor underlying inflation trends, the trajectory of economic improvement, and household debt conditions in determining the timing and scale of any additional rate increases," leaving the door open to further hikes. At the same time, members said it was necessary to "determine the timing of rate increases while assessing the impact on various economic actors, so as not to impose an unbearable burden on those who have yet to fully feel the benefits of economic improvement."


kimstar@heraldcorp.com