Shin Hyun-song says preemptive rate hikes gave Bank of Korea room to maneuver

Bank of Korea Governor Shin Hyun-song said the central bank's preemptive rate hikes in July and August gave it "room to maneuver in conducting monetary policy in line with domestic conditions."

Speaking at a national audit session of the National Assembly's Finance and Economy Planning Committee on Friday afternoon, Shin said the Bank of Korea raised rates in two consecutive months — July and August — explaining at the time that the moves were preemptive. "After that, the US Federal Reserve also raised rates, and there were external shocks including a rise in long-term interest rates abroad," he said.

"By raising rates twice in a row at that point, we gained room to conduct monetary policy well in line with domestic conditions," Shin added. "In that sense, acting early — nipping it in the bud — proved more helpful for monetary policy management this time around."

Shin said inflation is expected to remain above the Bank of Korea's target level and will likely stay considerably elevated next year as well. He added that the bank's commitment to respond "until inflation converges to the target level" does not mean an immediate rate hike, but rather that the goal will be achieved gradually within the monetary policy timeline, taking various economic conditions into account.