Remarks made at monetary policy press briefing

Bank of Korea Governor Shin Hyun-song gavels open the Monetary Policy Board's plenary session at the central bank's headquarters in Jung-gu, Seoul, on Thursday morning. [Bank of Korea]
Bank of Korea Governor Shin Hyun-song gavels open the Monetary Policy Board's plenary session at the central bank's headquarters in Jung-gu, Seoul, on Thursday morning. [Bank of Korea]

Bank of Korea Governor Shin Hyun-song described Thursday's decision to hold the benchmark interest rate steady as "the fruit of early hoeing."

Speaking at a monetary policy press briefing Thursday morning, Shin explained the rationale behind the rate decision. "By raising rates consecutively in July and August, we secured policy room," he said. "We gained the flexibility to conduct policy in line with domestic economic conditions without being driven by market developments."

The agricultural metaphor echoed remarks Shin made in August, when he raised the benchmark rate for the second consecutive time and emphasized the value of preemptive action, saying the central bank had "used a hoe to stop what would have required a spade." The idea was that raising rates early, ahead of an anticipated rise in inflation, could stabilize the economy at a lower cost. His comments Thursday were widely interpreted to mean that those earlier preemptive moves were precisely what allowed the board to hold rates at this meeting.

Shin also noted that South Korea's financial markets had remained stable despite turbulence abroad. "Particularly given that the US Federal Reserve raised rates in September and market conditions were volatile, the Korean financial market showed a stable picture," he said.

On the unanimous vote among the seven Monetary Policy Board members, Shin said there was no longer a need to communicate through dissenting opinions.

Looking ahead to next month's policy direction, Shin said the current tightening stance would need to continue. "Economic growth momentum and inflationary pressure are stronger than they were in August, so there is a need to maintain the current tightening policy stance," he said. "We will continue until we are confident that inflation is converging stably toward the target level."


kimstar@heraldcorp.com
forest@heraldcorp.com