The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 3.50% for the intermeeting period. Although inflation has continued its slowing trend, upside risks to inflation have increased due to an improvement in economic growth and heightened volatility of the exchange rate. Moreover, geopolitical risks also persist. The Board, therefore, sees that it is appropriate to assess domestic and external policy conditions while maintaining its current restrictive policy stance.

The currently available information suggests that the global economy has continued its moderate growth trend and that inflation has been trending downward. However, economic conditions and the pace of the inflation slowdown have differentiated across major countries. In global financial markets, government bond yields in major countries and the U.S. dollar index have escalated considerably and then eased, in-line with changes in expectations of the timing and size of policy rate cuts by the U.S. Federal Reserve. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected by inflation slowdowns and differentiation in monetary policy operations in major countries, and by developments in geopolitical risks.

The domestic economic growth rate substantially exceeded expectations in the first quarter this year owing to the continued buoyancy of exports and the easing of sluggishness in consumption and construction investment. Labor market conditions have been generally favorable with a continued robust increase in the number of persons employed. Going forward, it is forecast that consumption will continue its modest recovery in the second half of the year after a slowdown in the second quarter, amid an ongoing increase in exports. Accordingly, GDP growth for the year is projected to be 2.5%, considerably exceeding the February forecast of 2.1%. The future path of economic growth is likely to be affected by the pace of expansion in the IT industry, by the recovery trend in consumption, and by monetary policies in major countries.

Consumer price inflation has fallen to 2.9% in April due to slower increases in the prices of personal services and agricultural, livestock, and fisheries products. Core inflation (excluding changes in food and energy prices from the CPI) has slowed to 2.3%, and short-term inflation expectations have risen to 3.2% in May. Looking ahead, although upward pressures on prices could increase due to an improvement in economic growth, effects of such pressures are not likely to be significant with a modest recovery in consumption. As a result, consumer price inflation and core inflation for the year are also forecast to be 2.6% and 2.2%, respectively, which are consistent with the February forecast. The future path of inflation is subject to high uncertainties associated with movements of global oil prices and exchange rates, trends in agricultural product prices, and ripple effects from improvements in economic growth.

In financial and foreign exchange markets, long-term Korean Treasury bond yields have fallen after having previously risen, in-line with changes in expectations of the monetary policy both at home and abroad. The Korean won to U.S. dollar exchange rate has fluctuated considerably at a high level, affected by trends in neighboring currencies, including the U.S. dollar and the Japanese yen, and by geopolitical risks. Household loans have increased, mainly driven by housing-related loans. Housing prices have generally continued to decline, and there remain risks related to real estate project financing (PF).

The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over the medium-term horizon as it monitors economic growth, while paying attention to financial stability. While it is forecast that inflation will maintain its slowing trend amid domestic economic growth having improved more than expected, it is premature to be confident that inflation will converge on the target level, as upside risks to inflation forecasts have increased. The Board, therefore, will maintain a restrictive monetary policy stance for a sufficient period of time until such confidence is established. In this process, the Board will thoroughly assess trends of slowing inflation and improving economic growth, risks to financial stability, household debt growth, differentiation in monetary policy operations in major countries, and developments in geopolitical risks.

Opening Remarks to the Press Conference (May 23, 2024)

Today, the Monetary Policy Board (MPB) of the Bank of Korea decided to leave the Base Rate unchanged at 3.50%. I will first go over economic conditions at home and abroad, and then explain the background to today’s Base Rate decision.

To begin with changes in external conditions, the global economy is growing better than expected, but the pace of growth is moderate and economic conditions continue to differentiate across major countries. In the U.S., it is projected to maintain a favorable growth trend supported by continued increases in consumption and investment. Meanwhile, the euro area is expected to gradually ease its growth slump, but at a slower pace. In China, the economy is projected to grow in the upper 4% range, despite the ongoing slump in the real estate sector, thanks to the Chinese government’s stimulus measures and an improvement in exports.

The pace of a slowdown in inflation has also varied among major advanced countries, and the timing of inflation converging on the target level will also likely vary substantially from country to country. In the U.S., consumer price inflation and core inflation declined in April, but remain high in the mid-3% range. Meanwhile, in the euro area both consumer price inflation and core inflation have declined to the 2% range.

In global financial markets, long-term government bond yields in major countries and the U.S. dollar index have escalated considerably and then eased, in-line with changes in expectations for the timing and size of policy rate cuts by the U.S. Federal Reserve.

Looking at domestic conditions, the domestic economic growth rate exceeded expectations substantially in the first quarter this year. This is because net exports have significantly increased due to buoyancy in exports and reduced imports, and consumption and construction investment have improved more than expected owing to favorable weather conditions, an early execution of transfer payments, and the early launch of new-model smartphones. Starting from the second quarter, however, exports have continued to grow, but domestic demand has undergone a correction. While core inflation has fallen to 2.3% in April, consumer price inflation has stood at 2.9%, remaining high around the 3% range, and short-term inflation expectations have risen to 3.2% in May.

In domestic financial and foreign exchange markets, long-term Korean Treasury bond yields have fallen after having previously risen, in-line with changes in expectations of the monetary policy both at home and abroad. The Korean won to U.S. dollar exchange rate has fluctuated considerably at a high level, affected by trends in neighboring currencies, including the U.S. dollar and Japanese yen, and by geopolitical risks. Looking at household debt and the housing market, household loans in the financial sector increased as the growth rate of housing-related loans expanded and other loans, which had been decreasing, also rose. Housing prices in Seoul experienced an uptick, but in other regions prices continued to decrease. Although risks related to real estate project financing (PF) remain, such as rising delinquency rates, they are expected to be restructured in an orderly manner with the government’s announcement of soft-landing measures.

In addition, the Board has revisited its assessment of future growth and inflation paths, reflecting changes in domestic and external conditions after the February Economic Outlook.

GDP growth for the year is projected to be 2.5%, considerably exceeding the February forecast of 2.1%. Compared with the February forecasts, both external factors, including the upward trend in the global IT market and the strong growth of the U.S. economy, and domestic factors, such as the easing of sluggish domestic demand, have contributed 0.3%p and 0.1%p, respectively, to the recent forecast. The future path of economic growth is likely to be affected by the pace of expansion in the IT industry, by the trend of recovery in consumption, and by monetary policies in major countries.

Consumer price inflation and core inflation for the year are projected to be at 2.6% and 2.2%, respectively, which is consistent with the February forecast. We judged that the upward pressure on inflation from an improvement in economic growth is not significant enough to adjust the annual forecast. This is because, while the future inflation trend is expected to slightly exceed the February forecast path due to the improved growth trend and high exchange rate levels, the upward revision in the growth rate is largely driven by an increase in net exports, which has a minimal impact on inflation, and a modest recovery in consumption and the government’s price stabilization measures are expected to act as factors that limit upward pressure on inflation. The future path of inflation is subject to high uncertainties associated with movements of global oil prices and exchange rates, trends in agricultural product prices, and the ripple effects from improvements in domestic economic growth.

Lastly, I will explain the background to the Base Rate decision which reflects the abovementioned domestic and external conditions.

Although inflation has continued its slowing trend, upside risks to inflation have increased due to better-than-expected growth and heightened volatility of the exchange rate. Moreover, geopolitical risks also persist. The Board therefore judged that it is appropriate to leave the Base Rate unchanged at its current restrictive level and assess domestic and external policy conditions going forward.

All the Board members unanimously supported the decision.

Looking ahead, as the upside risks to the inflation outlook have increased since April, we need more time to gain confidence in the convergence of the inflation target and there is more uncertainty around the timing of a rate cut.

Therefore, the Board will maintain its current restrictive stance for a sufficient period of time until we are confident that inflation will converge on the target level. In this process, if the policy stance is shifted too early, there are risks that the pace of inflation moderation could be slower, and the exchange rate volatility and the increase in household debt could expand. On the other hand, if the policy stance is shifted too late, it could weaken the domestic demand recovery and increase the market instability risks due to a continuing rise in delinquency rates. We will comprehensively assess risks on both those aspects and make a decision on monetary policy after the second half of the year.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 3.50% for the intermeeting period. Although inflation is expected to continue its slowing trend, it still remains high and there are still high uncertainties regarding monetary policies in major countries and volatility of the exchange rate, and developments in geopolitical risks. The Board, therefore, sees that it is appropriate to maintain its current restrictive policy stance and to assess domestic and external policy conditions.

The currently available information suggests that the global economy has continued its moderate growth trend and that inflation has been trending downward. However, economic conditions and the pace of the inflation slowdown have differentiated across major countries. In global financial markets, government bond yields have risen and the U.S. dollar has strengthened as expectations of a policy rate cut by the U.S. Federal Reserve have weakened. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected by inflation slowdowns and differentiation in monetary policy operations in major countries, and by developments in geopolitical risks.

Domestic economic growth has continued its improving trend, mainly driven by exports. Labor market conditions have been generally favorable with a continued increase in the number of persons employed. Going forward, export growth is likely to increase greater than expected, supported by buoyancy in the IT industry, amid a modest recovery in consumption. It is judged that GDP growth for the year is to be consistent with or could be higher than the February forecast of 2.1%. The future path of economic growth is likely to be affected by monetary policies in major countries, by the pace of improvements in the IT industry, and by real estate project financing (PF) restructuring.

Core inflation (excluding changes in food and energy prices from the CPI) has fallen to 2.4% in March. However, consumer price inflation has stayed at 3.1%, the same as in the previous month, due to increases in agricultural product prices and global oil prices. Short-term inflation expectations among the general public have risen to 3.2%. Looking ahead, it is forecast that core inflation will continue its slowing trend, which is consistent with the path projected in February, and it is likely to slow to the 2% level at the end of the year. Consumer price inflation is also expected to gradually moderate, but uncertainties regarding the outlook, which are related to developments in geopolitical risks and movements of global oil prices, and trends in agricultural product prices, have increased.

In financial and foreign exchange markets, long-term Korean Treasury bond yields have rebounded after a decline, mainly affected by changes in expectations of the U.S. Federal Reserve’s monetary policy. The Korean won to U.S. dollar exchange rate has risen due to a strong U.S. dollar and due to weak neighboring currencies. Household loans have decreased due to a slowdown in housing-related loan growth and ongoing net repayments of other loans. Housing prices have continued to decline overall, and there remain risks related to real estate project financing (PF).

The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over the medium-term horizon as it monitors economic growth, while paying attention to financial stability. While it is forecast that domestic economic growth will continue its improving trend and that core inflation will maintain its slowing trend, it is premature to be confident that inflation will converge on the target level, as there is a high degree of uncertainty associated with the outlook for consumer price inflation. The Board, therefore, will maintain a restrictive monetary policy stance for a sufficient period of time until such confidence is established. In this process, the Board will thoroughly assess the inflation slowdown, risks to financial stability and economic growth, household debt growth, differentiation in monetary policy operations in major countries, and developments in geopolitical risks.

Opening Remarks to the Press Conference (April 12, 2024)

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 3.50% for the intermeeting period. Although inflation has continued its slowing trend, it is judged that there are high uncertainties around the inflation outlook and it is necessary to assess the changes in domestic and external policy conditions such as monetary policies in major countries and volatility in the exchange rate, and geopolitical risks. The Board, therefore, sees that it is appropriate to maintain its current restrictive policy stance.

The currently available information suggests that global economic growth is projected to continue slowing, but it will be more favorable than expected. Inflation in major countries continues its trend of a slowdown, but it is expected to take a considerable period of time for that inflation to stabilize on the target level. In global financial markets, government bond yields have risen and the U.S. dollar has strengthened due to weakening expectations of an early policy rate cut by the U.S. Federal Reserve. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected by global oil prices and inflation trends, by monetary policy operations in major countries and their effects, and by developments in geopolitical risks.

Domestic economic growth has continued to improve at a modest pace, mainly driven by exports. Labor market conditions have been generally favorable with a continued robust increase in the number of persons employed. Going forward, domestic economic growth is projected to maintain its improving trends with an ongoing increase in exports, despite the slow recovery of consumption and the sluggishness in construction investment. GDP growth for the year is expected to be 2.1%, which is consistent with the November forecast. However, there are high uncertainties regarding the outlook, which are related to the effects of monetary policy in major countries, the pace of improvement in the IT industry, and the impact of real estate project financing (PF) restructuring.

Inflation has maintained its slowing trend. Consumer price inflation has fallen to 2.8% in January due to slower growth in the prices of personal services and processed food products. Core inflation (excluding changes in food and energy prices from the CPI) has slowed to 2.5%, and short-term inflation expectations among the general public have fallen to 3.0%. Looking ahead, it is forecast that consumer price inflation will temporarily rise slightly owing to increases in agricultural product prices, and then gradually fall again. Consumer price inflation for the year is projected to be 2.6%, which is consistent with the November forecast. Core inflation for the year is expected to be 2.2%, slightly lower than the November forecast of 2.3%, reflecting the slow pace of consumption recovery. The future path of inflation is likely to be affected by developments in geopolitical risks, by movements of global oil prices and domestic agricultural product prices, and by economic growth at home and abroad.

In financial and foreign exchange markets, long-term Korean Treasury bond yields and the Korean won to U.S. dollar exchange rate have risen, mainly affected by weakening expectations of an early policy rate cut by the U.S. Federal Reserve. Household loan growth has remained low due to an ongoing reduction in other loans, despite continued growth in housing-related loans. Housing prices have continued to decline across all parts of the country, and risks related to real estate project financing (PF) still remain.

The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over the medium-term horizon as it monitors economic growth, while paying attention to financial stability. While it is forecast that domestic economic growth will continue its improving trend and that inflation will maintain its slowing trend, it is premature to be confident that inflation will converge on the target level. Moreover, uncertainties surrounding domestic and external policy conditions are also judged to be high. The Board, therefore, will maintain a restrictive policy stance for a sufficiently long period of time until the Board is confident that inflation will converge on the target level. In this process, the Board will thoroughly assess the inflation slowdown, risks to financial stability and economic growth, household debt growth, monetary policy operations in major countries, and developments in geopolitical risks.

Opening Remarks to the Press Conference (February 22, 2024)

Today, the Monetary Policy Board (MPB) of the Bank of Korea decided to leave the Base Rate unchanged at 3.50%. I will first go over economic conditions at home and abroad, and then explain the background to today’s Base Rate decision.

To begin with changes in external conditions, the global economy is projected to continue slowing but it will be more favorable than expected. Economic conditions have been differentiated across major countries. In the U.S., growth for this year is predicted to be around 2%, much higher than the earlier forecast, due to growing investments and consistently robust labor market conditions. In the euro area, although the economic downturn is expected to ease gradually, the pace is likely to be slow. In China, the economy is projected to grow at the mid-4% level, despite the ongoing slump in the real estate sector, thanks to its economic stimulus.

Inflation in major economies continues its trend of a slowdown, but it is forecast that it will take a considerable period of time for inflation to stabilize on the target level. In the U.S., consumer price inflation stood at 3.1% in January, showing a slower-than-expected moderation, and core inflation remained at 3.9%, the same as the previous month. Going forward, the pace of slowdown is expected to be moderate, and the timing of inflation declining to the 2% level is projected to be after 2025.

As for global financial markets, government bond yields in major economies have risen and the U.S. dollar has strengthened due to the weakening expectations for early policy rate cuts by the U.S. Federal Reserve. Stock prices have risen, primarily in advanced countries, driven by improvements in corporate performances.

Looking at domestic conditions, economic growth has continued to improve at a modest pace with an ongoing increase in exports, mainly driven by semiconductors and automobiles. However, the private consumption recovery has been slow, affected by elevated inflation and interest rates. Domestic inflation has maintained its slowing trend owing to low demand-side pressures. Consumer price inflation in January has fallen to 2.8%, core inflation has slowed to 2.5%, and short-term inflation expectations have also fallen to 3.0% in January and February.

In domestic financial and foreign exchange markets, long-term Korean Treasury bond yields and the Korean won to U.S. dollar exchange rate have risen, affected primarily by changes in expectations for the U.S. monetary policy stance. Stock prices have risen on expectations for improvements in the semiconductor business. With regard to household debt and the housing market, household loans in the financial sector only grew by around 1 trillion won in January, despite a sustained increase in housing-related loans, due to the continued decline in other loans. Housing prices have continued to decline across all parts of the country, and risks related to real estate project financing (PF) still remain.

In addition, the Board has revisited its assessment of future growth and inflation paths, reflecting changes in domestic and external conditions after the November Economic Outlook.

GDP growth for this year is projected to be 2.1%, consistent with our November forecast. Compared with the November forecast, weaker domestic demand, including the downward revision of the private consumption forecast from 1.9% to 1.6%, contributed to lowering the overall growth rate by 0.1%p from the November forecast, yet this decrease was offset by improved exports driven by robust U.S. growth and the recovery in the semiconductor industry, contributing to raising the growth rate by 0.1%p. However, the future growth path is surrounded by high uncertainties regarding the effects of monetary policy in major countries, the pace of improvement in the IT industry, and the impact of domestic real estate project financing (PF) restructuring.

Consumer price inflation for this year is projected to be 2.6%, also consistent with the November outlook. It is expected to temporarily pick up slightly due to the increase in agricultural product prices, and then to decline moderately afterward, slowing to the lower-2% range by the end of the year. Core inflation is projected to be 2.2%, revised slightly down from 2.3% in the November outlook, reflecting the impact of a slow pace of consumption recovery. The future inflation path is likely to be affected by developments of geopolitical risks, by movements of global oil prices and domestic agricultural product prices, and by economic growth at home and abroad.

Lastly, I will explain the background to the Base Rate decision, which reflects the abovementioned domestic and external conditions.

Although inflation has continued its slowing trend, there are high uncertainties regarding the inflation outlook. Also, it is necessary to monitor developments of domestic and external risk factors, such as monetary policy in major countries, volatility in the exchange rate, fluctuations in global oil prices from geopolitical risks, and household debt growth. The Board therefore judged that it is appropriate to leave the Base Rate unchanged at its current restrictive level.

All the Board members unanimously supported the decision.

Looking ahead, it is premature to be confident that inflation will converge on the target level. Due to not only supply-side risks including global oil prices but high inflation for living necessaries which limits the decline in inflation expectations, it is anticipated that the process of inflation moderation will not be smooth.

Therefore the Board deems it warranted to stabilize inflation on 2% by maintaining a restrictive monetary policy stance for a sufficiently long period of time. In this process, the Board will determine how long to continue the restrictive monetary policy stance while thoroughly assessing the above mentioned uncertainty factors.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 3.50% for the intermeeting period. Although inflation has continued its underlying trend of a slowdown, it still remains high and uncertainties regarding the outlook are also judged to be high. The Board, therefore, sees that it is appropriate to assess domestic and external policy conditions while maintaining its current restrictive policy stance.

The currently available information suggests that the trends of a slowdown in both global economic growth and in inflation have continued, driven by restrictive monetary policy stances being sustained in major countries. However, inflation in major countries still remains high, and it is expected to take a considerable period of time for that inflation to stabilize on the target level. In global financial markets, government bond yields have fallen and the U.S. dollar has slightly weakened, led by expectations of a pivot in the U.S. Federal Reserve’s monetary policy stance. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected by global oil prices and inflation trends, by monetary policy operations in major countries and their effects, and by developments in geopolitical risks.

Domestic economic growth has continued to improve at a modest pace, mainly driven by exports. Labor market conditions have been generally favorable with a continued robust increase in the number of persons employed, while the unemployment rate has risen owing to temporary factors. Going forward, domestic economic growth is projected to maintain its improving trends with an ongoing increase in exports, although consumption and construction investment are expected to recover at a slow pace. GDP growth for the year is expected to be generally consistent with the November forecast of 2.1%. The future path of economic growth is likely to be affected by the effects of restrictive monetary policy stances being sustained at home and abroad, and by the degree of improvement in the IT industry.

Consumer price inflation has fallen to 3.2% in December due to the continued decline in prices of petroleum products. Core inflation (excluding changes in food and energy prices from the CPI) and short-term inflation expectations among the general public have moderated to 2.8% and 3.2%, respectively. Looking ahead, inflation is projected to maintain its slowing trend, but the pace of slowdown is expected to moderate due to the effects of accumulated cost pressures. Consumer price inflation is likely to fluctuate at around 3% for some time and then gradually moderate, and it is expected to be generally consistent with the November forecast of 2.6% for the year. Core inflation is also forecast to maintain its modest slowdown, which is consistent with the path projected in November. The future path of inflation is subject to high uncertainties associated with movements of global oil prices and agricultural product prices, and with economic growth at home and abroad.

In financial and foreign exchange markets, long-term Korean Treasury bond yields have fallen due to expectations of a pivot in monetary policy stances both at home and abroad. The Korean won to U.S. dollar exchange rate has fluctuated within a relatively narrow range. The extent of the increase in household loans has narrowed significantly due to a reduction in other loans, despite continued growth in housing-related loans. Housing prices have shifted to a decline across all parts of the country, and risks related to real estate project financing (PF) have heightened.

The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over the medium-term horizon as it monitors economic growth, while paying attention to financial stability. While domestic economic growth is forecast to continue its improving trends, inflation still remains high and uncertainties regarding the outlook are also judged to be high. The Board, therefore, will maintain a restrictive policy stance for a sufficiently long period of time until the Board is confident that inflation will converge on the target level. In this process, the Board will thoroughly assess the inflation slowdown, risks to financial stability and economic growth, household debt growth, monetary policy operations in major countries, and developments in geopolitical risks.

Opening Remarks to the Press Conference (January 11, 2024)

Today, the Monetary Policy Board (MPB) of the Bank of Korea decided to leave the Base Rate unchanged at 3.50%. I will first go over economic conditions at home and abroad, and then explain the background to today’s Base Rate decision.

To begin with changes in external conditions, the global economy is expected to continue to slow, as the restrictive monetary policy stances in major countries continue. In the U.S., growth is predicted to slow, but at a modest pace, given the easing of financial conditions since the December FOMC meeting and the favorable employment situation. In the euro area, the economy is expected to remain sluggish due to weaker external demand. In China, the growth rate is forecast to decline to the mid-4% range, affected by the continued slump in the real estate sector.

Inflation in major countries continues to slow, but it is forecast that it will take a considerable period of time for inflation to stabilize on the target level. In the U.S. and the euro area, consumer price inflation dropped significantly to around 3% at the end of 2023, from the peak of 2022 at 9%-10%. Going forward, however, the pace of slowdown is expected to moderate, and the timing of inflation converging on the 2% level is projected to be after the second half of next year.

As for global financial markets, due to growing expectations for the possibility of a rate cut by the U.S. Federal Reserve, government bond yields have fallen in major countries, the U.S. dollar has weakened, and stock prices have risen. 

Looking at domestic conditions, economic growth has continued to improve at a modest pace, mainly led by exports. While the consumption recovery has weakened, affected by elevated inflation and interest rates, exports have continued to expand, driven mainly by automobiles and semiconductors. 

Looking ahead, the domestic economy is expected to continue the improvement that has been ongoing since the second half of last year. The GDP growth rate for this year is projected to be generally consistent with the November forecast of 2.1%. This projection is the result of a slight upward revision to the export forecast due to an improvement in the semiconductor industry offsetting the slight downward revision to the consumption forecast due to weaker consumption in face-to-face services industries compared with the November forecast. The future growth path is likely to be affected by the effects of the sustained high interest rates, and by the degree of improvement in the IT industry.

Domestic inflation has maintained its slowing trend owing to declines in global oil prices and low demand-side pressures. Consumer price inflation, which had risen to 3.8% in October, declined to 3.2% in December. Core inflation (excluding food and energy) and short-term inflation expectations also slowed to 2.8% and 3.2%, respectively.

Going forward, domestic inflation will continue to slow, but the pace of slowdown is expected to moderate due mainly to the effects of accumulated cost pressures. Consumer price inflation is likely to fluctuate at around 3% for some time and then gradually decrease. The annual rate is expected to be consistent with the November forecast of 2.6%. Core inflation will also continue to slow at a modest pace, consistent with the initial forecast, and the rate for this year is expected to stand at 2.3%. However, there is high uncertainty on the future inflation path associated with movements of global oil prices and agricultural product prices, and with economic growth at home and abroad.

In domestic financial and foreign exchange markets, after last December’s FOMC meeting, long-term Korean Treasury bond yields and the Korean won to U.S. dollar exchange rate declined and stock prices rose. However, coming into this year, as expectations for the possibility of a rate cut by the U.S. Federal Reserve have somewhat weakened, the movements in December have turned back to some degree.

Looking at household debt and the housing market, household loans in the financial sector increased only slightly due to a significant decrease in other loans, despite a continued increase in housing-related loans. Housing prices have shifted to a decline both in Seoul and its surrounding areas, and in the rest of the country, due to the weakening of purchase sentiment. Risks associated with real estate project financing (PF) have increased.

Lastly, I will explain the background to the Base Rate decision, which reflects the abovementioned domestic and external conditions.

Although inflation has continued its slowing trend, it still remains high. Also, there are high uncertainties regarding the outlook. The Board therefore judged that it is appropriate to leave the Base Rate unchanged at its current restrictive level and assess domestic and external policy conditions going forward.

All the Board members unanimously supported the decision.

Looking ahead, considering that inflation continues to slow and that external risks regarding oil prices and the Israel-Hamas conflict have eased, it is judged that the need to raise the Base Rate further has decreased compared to before. 

However, prematurely lowering the Base Rate could stimulate inflation expectations and cause inflation to rise again. Furthermore, in the current situation, the side effects of stimulating expectations for a rise in real estate prices could outweigh the benefits of economic stimulation by cutting the rate. Therefore, the Board judged that achieving price stability, by maintaining a restrictive monetary policy stance for a sufficiently long period of time until we are confident that inflation will converge on the target level, is of the utmost importance.

In addition, the Board today decided to temporarily increase the amount of financial support to regional small and medium-sized enterprises (SMEs), utilizing 9 trillion won worth of reserves in the ceiling of the Bank Intermediated Lending Support Facility.

In a situation where it is still premature to discuss a rate cut, as it is expected that the negative impacts from high interest rates could disproportionately affect vulnerable sectors and regional SMEs, the Board judged that it is necessary to complement the high policy rate through targeted and temporary support for them.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 3.50% for the intermeeting period. Although inflation has been elevated than previously expected, it is projected to continue its underlying trend of a slowdown. In addition, there are high uncertainties in household debt growth and external conditions. The Board, therefore, sees that it is appropriate to maintain its current restrictive policy stance.

The currently available information suggests that both concerns about a further tightening by the U.S. Federal Reserve and geopolitical risks have been alleviated. However, global economic growth is projected to continue slowing, driven by a prolongation of restrictive monetary policy stances in major countries. Inflation in major countries still remains high, while continuing its slowdown, and core inflation is declining at a slow pace. In global financial markets, government bond yields in major countries have fallen significantly and the U.S. dollar has weakened considerably. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected by the movements of global oil prices and the global inflation slowdown, by monetary policy operations in major countries and their effects, and by developments in the Israel-Hamas conflict.

Domestic economic growth has continued to improve at a modest pace owing to the easing of sluggishness in exports. Labor market conditions have been generally favorable, as the scale of the increase in the number of persons employed has expanded and as the unemployment rate has remained low. Going forward, domestic economic growth is expected to maintain its improving trends with an ongoing recovery in exports. GDP growth for this year is forecast to be consistent with the August forecast of 1.4%. The growth rate is expected to pick up to 2.1% in 2024, though slightly lower than the August forecast of 2.2%, affected by a prolongation of restrictive monetary policy stances at home and abroad and by a slow pace of consumption recovery. In the economic outlook, uncertainties regarding the effects from a prolongation of restrictive monetary policy stances at home and abroad and developments in geopolitical risks are judged to be high.

Consumer price inflation has risen to 3.8% in October due to the increase in the prices of agricultural products and energy. However, core inflation (excluding changes in food and energy prices from the CPI) has fallen to 3.2% in October. Short-term inflation expectations among the general public have risen slightly to 3.4%. Looking ahead, inflation is projected to maintain its underlying slowing trend owing to the weakening of demand-side pressures and to declines in the prices of global oil and agricultural products. However, it is forecast to run above the path projected in August, affected by cost pressures being higher than expected. Consumer price inflation will gradually moderate and will run at around 3% in the first half of 2024, and it is projected to be 3.6% in 2023 and 2.6% in 2024. (The August forecast was 3.5% and 2.4%, respectively.) Meanwhile, core inflation is forecast to maintain its modest slowdown, and is expected to be 3.5% in 2023 and 2.3% in 2024. (The August forecast was 3.4% and 2.1%, respectively.) The inflation path is likely to be affected by movements of global oil prices and exchange rates, and economic growth at home and abroad.

In financial and foreign exchange markets, risk aversion has subsided on heightened expectations of an end to policy rate hikes by the U.S. Federal Reserve, while geopolitical risks have eased. Korean Treasury bond yields and the Korean won to U.S. dollar exchange rate have fallen significantly and stock prices have risen. Household loans have continued to grow, mainly driven by housing-related loans, and the extent of the rise in housing prices has narrowed.

The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over the medium-term horizon as it monitors economic growth, while paying attention to financial stability. While domestic economic growth is forecast to continue its improving trends, the inflation path is expected to be higher than previously forecast. The Board, therefore, will maintain a restrictive policy stance for a sufficiently long period of time until the Board is confident that inflation will converge on the target level. In this process, the Board will make a judgement regarding the need to raise the Base Rate further, while thoroughly assessing the inflation slowdown, financial stability risks, economic downside risks, household debt growth, monetary policy operations in major countries, and developments in geopolitical risks.

Opening Remarks to the Press Conference (November 30, 2023)

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 3.50% for the intermeeting period. Although inflation is projected to continue its underlying trend of a slowdown, uncertainties regarding the future path of inflation and growth have risen significantly due to a prolongation of restrictive monetary policy stances in major countries and heightened geopolitical risks. In addition, it is forecast that the pace of inflation slowdown will moderate more than previously expected, and it is necessary to monitor household debt growth. The Board, therefore, sees that it is appropriate to maintain its current restrictive policy stance. Regarding the need to raise the Base Rate further, the Board will make a judgement while assessing the changes in domestic and external policy conditions.

The currently available information suggests that uncertainties regarding economic and inflationary trends have increased across the global economy, driven by a prolongation of restrictive monetary policy stances in major countries and by the Israel-Hamas conflict. Global economic growth is projected to continue slowing. Inflation in major countries still remains high, though falling gradually, and upside risks have increased due to the rise in global oil prices. In global financial markets, volatility of major price variables has increased with government bond yields rising significantly and with the U.S. dollar strengthening considerably. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected by the movements of global oil prices and the global inflation slowdown, by monetary policy changes in major countries and their effects, and by developments in the Israel-Hamas conflict.

Domestic economic growth has continued to improve at a modest pace owing to the easing of sluggishness in exports, although the recovery in private consumption has been somewhat slow. Labor market conditions have been generally favorable, as both a low unemployment rate and a robust increase in the number of persons employed have continued. Going forward, domestic economic growth is expected to improve gradually with the easing of the sluggishness in exports. GDP growth for the year is expected to be generally consistent with the August forecast of 1.4%. However, uncertainties surrounding the economic outlook are judged to be elevated, affected by heightened geopolitical risks and by the prolongation of restrictive monetary policy stances in major countries.

Consumer price inflation has risen from August to 3.7% in September, due to the increase in the price of energy and of agricultural products. However, both core inflation (excluding changes in food and energy prices from the CPI) and short-term inflation expectations among the general public have stayed at 3.3% in September, the same as in August. Looking ahead, it is forecast that consumer price inflation will fall to the lower-3% range at the end of this year and will continue to gradually moderate in 2024. However, upside risks to inflation have increased due to the effects of higher global oil prices and exchange rates, and due to the Israel-Hamas conflict. Accordingly, it is judged that the timing of consumer price inflation converging on the target level is more likely to be delayed than previously expected. Meanwhile, core inflation is also projected to maintain its underlying slowing trend, owing to the weakening of demand-side pressures. However, the pace of the slowdown is likely to be more modest than previously forecast due to the continuing spillover effects of accumulated cost pressure.

In financial and foreign exchange markets, volatility has increased as the U.S. Federal Reserve has signaled a prolongation of a high policy rate and as geopolitical risks have expanded. Long-term Korean Treasury bond yields and the Korean won to U.S. dollar exchange rate have risen significantly and stock prices have fallen. Meanwhile, the risks to some non-bank financial sectors have eased. Housing prices have continued their upward trend, especially in Seoul and its surrounding areas. Household loans have continued to increase, mainly driven by housing-related loans.

The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over the medium-term horizon as it monitors economic growth, while paying attention to financial stability. While domestic economic growth is forecast to gradually improve, uncertainties surrounding the policy decision have also risen. The Board, therefore, will maintain a restrictive policy stance for a considerable time with an emphasis on ensuring price stability, while making a judgement regarding the need to raise the Base Rate further. In this process, the Board will thoroughly assess the inflation slowdown, financial stability risks, economic downside risks, monetary policy changes in major countries, household debt growth, and developments in geopolitical risks.

Opening Remarks to the Press Conference (October 19, 2023)

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 3.50% for the intermeeting period. Although inflation has slowed, it is forecast to pick up again to around the 3% level since August and to remain above the target level for a considerable time. In addition, uncertainties regarding economic conditions and monetary policy in major countries have risen. It is also necessary to closely monitor household debt trends. The Board, therefore, sees that it is appropriate to maintain its current restrictive policy stance. Regarding the need to raise the Base Rate further, the Board will make a judgement while assessing the changes in domestic and external policy conditions.

The currently available information suggests that global economic growth is projected to continue slowing due to the effects of elevated interest rates and a weakening recovery in the Chinese economy. Global inflation still remains high, though falling gradually, and the pace of the inflation slowdown has differentiated across countries. In global financial markets, government bond yields have risen and the U.S. dollar has strengthened due to prospects for a prolongation of the restrictive policy stance in major countries. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected by the movements of international commodity prices and the global inflation slowdown, monetary policy changes in major countries and their effects, and developments in the Chinese economy.

The improvement in domestic economic growth has somewhat moderated, with private consumption recovery slowing. Labor market conditions have been generally favorable, but the increase in the number of persons employed has been gradually decreasing due to the economic slowdown. Going forward, domestic economic growth is expected to improve gradually with a modest recovery in private consumption and the sluggishness in exports easing. GDP growth for this year is expected to be 1.4%, which is consistent with the May forecast. In the economic outlook, however, uncertainties regarding future growth in the Chinese economy and its domestic impacts, economic growth in major advanced countries, and the timing of a rebound in the IT industry are judged to be high.

Consumer price inflation has continued to moderate as expected, falling to 2.3% in July. This is mainly because the price of petroleum products has fallen substantially owing to the base effect from global oil prices, and the rise in the prices of personal services and processed food products has continued to slow. Both core inflation (excluding changes in food and energy prices from the CPI) and short-term inflation expectations among the general public have declined to 3.3%. Looking ahead, it is forecast that consumer price inflation will pick up again from August and fluctuate at around 3% until the end of the year. Consumer price inflation for the year is expected to be 3.5%, which is consistent with the May forecast. Meanwhile, core inflation is projected to maintain its modest slowdown. However, it is projected to be 3.4% for the year, which is slightly higher than the May forecast of 3.3% due to accumulated cost pressure. The inflation path is likely to be affected by changes in international commodity prices, weather conditions, and economic growth at home and abroad.

In financial and foreign exchange markets, the Korean won to U.S. dollar exchange rate has risen significantly due to prospects for a prolongation of the restrictive monetary policy stance in major countries and concerns about the economic slowdown in China. Long-term Korean Treasury bond yields have risen along with government bond yields in major countries. Meanwhile, the risks to some non-bank financial sectors have somewhat eased. Housing prices in Seoul and its surrounding areas have increased at a faster pace, while in the rest of the country the extent of the decline in housing prices has narrowed. The scale of the increase in household loans has expanded, mainly driven by housing-related loans.

The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over the medium-term horizon as it monitors economic growth, while paying attention to financial stability. It is forecast that domestic economic growth will gradually improve, but inflation will remain above the target level for a considerable time. Moreover, uncertainties surrounding the policy decision are judged to be high. The Board, therefore, will maintain a restrictive policy stance for a considerable time with an emphasis on ensuring price stability, while making a judgement regarding the need to raise the Base Rate further. In this process, the Board will thoroughly assess the inflation slowdown, financial stability risks, economic downside risks, the effects of the Base Rate raises, monetary policy changes in major countries, and household debt growth.

Opening Remarks to the Press Conference (August 24, 2023)

Today, the Monetary Policy Board (MPB) of the Bank of Korea decided to leave the Base Rate unchanged at 3.50%. I will first go over financial and economic conditions at home and abroad, and then explain the background to today’s Base Rate decision.

To begin, a look at the changes in external conditions since the July meeting shows that global economic growth is expected to continue slowing due to the effects of elevated interest rates and a weakening recovery in the Chinese economy. Economic conditions are differentiated across major economies. In the U.S., the probability of a soft landing for the economy is assessed to have increased as the labor market remains robust and consumption continues to grow. In the euro area, while the sluggishness of the economy has somewhat eased, mainly led by the services sector, economic growth still remains low. In China, concerns about an economic slowdown have risen mainly due to property market instability and sluggish exports.

While inflation in major countries has fallen gradually, it still remains well above the target level. In the U.S., consumer price inflation stood at 3.2% in July, up from 3.0% in June. In the euro area and the U.K., inflation still remains elevated at around the 5%-6% range.

As for global financial markets, major price variables have fluctuated substantially, affected by changes in expectations of monetary policy in major countries and by concerns about the economic slowdown in China. The U.S. dollar has strengthened and government bond yields in major countries have risen due to favorable U.S. economic indicators and the ensuing prospects for a prolongation of the restrictive policy stance.

Looking at domestic conditions, the improvement in domestic economic growth has somewhat moderated. The decline in exports continues to moderate in its underlying trend, although the extent of the decline fluctuated from month to month. Consumption recovery, on the other hand, has somewhat slowed due to weaker pent-up demand and unfavorable weather conditions.

Domestic consumer price inflation continues to moderate as expected, falling to 2.3% in July. This is mainly because the prices of petroleum products have fallen substantially owing to the base effect of global oil prices, and the rise in the prices of personal services and processed food products has continued to slow. Core inflation and short-term inflation expectations both fell to 3.3%.

As for domestic financial and foreign exchange markets, volatility has heightened. The Korean won to U.S. dollar exchange rate has risen significantly due to prospects for a prolongation of the restrictive policy stance in major economies and concerns about the economic slowdown in China. Long-term Korean Treasury bond yields have risen along with government bond yields in major countries. Meanwhile, the risks to some non-bank financial sectors appear to have eased, but the anxiety factors have not been fully resolved.

Looking at household debt and the housing market, housing prices in Seoul and its surrounding areas have increased at a faster pace, and in the rest of the country the extent of decline in housing prices has narrowed, as purchase sentiment strengthened and transactions increased. Affected by this, household loans, mainly driven by housing-related loans, have increased by a larger extent.

In addition, the Board has revisited its review of inflation and growth trends, reflecting changes in domestic and external conditions since the May Economic Outlook.

First, GDP growth for this year is projected to be 1.4%, which is consistent with the May forecast. Our decision to maintain the outlook for this year is based on a combination of downside and upside factors. Downside factors include weakened domestic pent-up consumption, a slow economic recovery in China, and concerns over further tightening by the U.S. Federal Reserve. Upside factors include an influx of group tourists from China and the increased possibility of a soft landing for the U.S. economy. As these uncertainties are expected to be somewhat alleviated by the time of the next MPB meeting, a more accurate assessment of domestic and external economic conditions can be provided then. Our projection for next year's GDP growth has been slightly adjusted downward from 2.3% to 2.2%, reflecting factors such as the slowdown in the Chinese economy.

Consumer price inflation is projected to pick up again from August and fluctuate at around 3% until the end of the year, which aligns with our initial forecast. The growth rate for this year is also expected to be consistent with the May forecast of 3.5%. Core inflation is expected to exhibit a more moderate slowdown than initially projected owing to factors such as accumulated cost pressures. The rate for this year is projected to be 3.4%, slightly higher than the May forecast of 3.3%. The future inflation path is likely to be affected by changes in international commodity prices, weather conditions, and economic growth at home and abroad. 

Lastly, I will explain the background to the Base Rate decision, which reflects the abovementioned domestic and external conditions.

Although inflation has continued to slow, it is forecast that there will be a considerable period of time before inflation converges on the target level. In addition, uncertainties regarding monetary policy and economic conditions in major countries have increased. It is also necessary to closely monitor household debt trends. The Board therefore decided today to leave the Base Rate unchanged at its current restrictive level.

All the Board members unanimously supported the decision.

Looking ahead, the Board deems it warranted to maintain the restrictive policy stance for a considerable time and judge whether the Base Rate needs to be raised further.

In this process, the Board will thoroughly assess the slowdown of domestic inflation, financial stability risks, economic downside risks, the effects of accumulated Base Rate hikes, monetary policy changes in major countries, and household debt growth.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 3.50% for the intermeeting period. Although inflation has slowed, it is forecast to pick up again to around the 3% level since August and to remain above the target level for a considerable time. In addition, it is necessary to further monitor monetary policy in major countries and household debt trends. The Board, therefore, sees that it is appropriate to maintain its current restrictive policy stance. Regarding the need to raise the Base Rate further, the Board will make a judgement while assessing the changes in domestic and external policy conditions.

The currently available information suggests that global economic growth has been more favorable than expected, but the growth is projected to gradually slow due to the effects of elevated interest rates. While global inflation has fallen gradually, the pace of the inflation slowdown has differentiated across countries. In global financial markets, government bond yields have risen as major countries have strengthened their restrictive monetary policy stance, and the U.S. dollar has weakened due to a slowdown in U.S. inflation after having strengthened. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected by the pace of the global inflation slowdown, monetary policy changes in major countries and their effects, and the recovery in the Chinese economy.

The sluggishness of domestic economic growth has somewhat eased, as the decline in exports has moderated. Labor market conditions have been generally favorable, with the increase in the number of persons employed being higher than expected. Going forward, domestic economic growth is expected to recover gradually with private consumption continuing its modest recovery and exports improving due to the easing of the sluggishness in the IT industry. GDP growth for this year is expected to be consistent with the May forecast of 1.4%.

Consumer price inflation has continued to moderate as expected, falling significantly from 3.3% in May to 2.7% in June. This is mainly because the decline in the price of petroleum products has widened owing to the base effect from global oil prices, and the rise in the prices of personal services has weakened. Core inflation (excluding changes in food and energy prices from the CPI) has declined considerably from 3.9% in May to 3.5% in June, and short-term inflation expectations among the general public have stayed at 3.5%, the same as in May. Looking ahead, it is forecast that consumer price inflation will continue slowing until July, but then will pick up after August and fluctuate at around the 3% level until the end of the year. Consumer price inflation for the year is expected to be generally consistent with the May forecast of 3.5%. Meanwhile, core inflation is projected to maintain its slowing trend in the second half of the year. However, it is to be slightly higher than the May forecast of 3.3%, due to accumulated cost pressure and continuing favorable demand for services.

In financial and foreign exchange markets, the Korean won to U.S. dollar exchange rate has fluctuated considerably and Korean Treasury bond yields have risen, affected by changes in expectations of monetary policy in major countries. Meanwhile, the risks to some non-bank financial sectors have expanded. Housing prices in Seoul and its surrounding areas have shifted to an increase, while in the rest of the country, the extent of the decline in housing prices has greatly narrowed. The scale of the increase in household loans has expanded, mainly driven by housing-related loans.

The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over the medium-term horizon as it monitors economic growth, while paying attention to financial stability. It is forecast that domestic economic growth will gradually improve, but inflation will remain above the target level for a considerable time. Moreover, uncertainties surrounding the policy decision are judged to be high. The Board, therefore, will maintain a restrictive policy stance for a considerable time with an emphasis on ensuring price stability. In this process, the Board will make a judgement regarding the need to raise the Base Rate further, while thoroughly assessing the pace of inflation slowdown, financial stability risks, economic downside risks, the effects of the Base Rate raises, and monetary policy changes in major countries.

Opening Remarks to the Press Conference (July 13, 2023)

Today, the Monetary Policy Board (MPB) of the Bank of Korea decided to leave the Base Rate unchanged at 3.50%. I will first go over financial and economic conditions at home and abroad, and then explain the background to today’s Base Rate decision.

To begin, a look at the changes in external conditions since the May meeting shows that global economic growth has been more favorable than expected, but the growth is projected to slow gradually affected by elevated interest rates. Economic conditions appear to be more or less differentiated across major economies. Growth in the U.S. is expected to decline gradually as the effects of rate hikes spread, but expectations of a soft landing for the economy have somewhat heightened as the labor market has remained robust. The euro area is likely to extend its modest economic growth due to high inflation and the ongoing rate hikes. The Chinese economy has shown a weaker recovery due to sluggish exports and a deepened slump in its property market, and its growth outlook has been revised downward.

While inflation in major countries has declined gradually, the pace of slowdown is differentiated across countries. In the U.S., consumer price inflation fell to 3.0% in June, declining at a relatively rapid pace. In the euro area, however, inflation was high at 5.5% in June, declining at a slower pace. Meanwhile, in the U.K., inflation has been sticky still being at around the 7%-8% level.

As for global financial markets, major price variables have fluctuated substantially, mainly affected by changes in expectations of monetary policy in major countries. Long-term government bond yields have risen following the upward adjustment of terminal rate expectations in major advanced economies. The U.S. dollar had strengthened as the June FOMC meeting left open the possibility of about two more rate hikes, and then has weakened recently affected by the slowing employment and price indicators.

Looking at domestic conditions, the sluggishness of domestic economic growth has somewhat eased, as the downtrend of exports has moderated.

Going forward, domestic economic growth is projected to recover gradually, as exports improve due to the easing of the sluggishness in the IT industry and as consumption continues its modest recovery. This economic growth is consistent with the May forecast, and the growth rate for this year is expected to be in line with the previous forecast of 1.4%. The growth rate for the first half of the year is expected to be slightly above the original forecast due to the easing of sluggish exports, but for the second half uncertainties surrounding the growth path have been elevated owing to the slow recovery in China. 

Domestic inflation continues to slow in line with the original forecast as the decline in the prices of petroleum products has widened, and as the increase in prices of personal services has slowed. Consumer price inflation fell to 2.7% in June, the first decline into the 2% range since September 2021. Core inflation, which had been sticky so far, fell considerably to 3.5% in June from the 3.9% of the previous month. Meanwhile, short-term inflation expectations remained unchanged from the previous month at 3.5%.

Looking ahead, consumer price inflation is forecast to continue to slow until July, but then rise again since August, and then fluctuate at around 3% until the end of the year. Consumer price inflation for this year is expected to be generally consistent with the May forecast of 3.5%. Core inflation is projected to maintain its slowing trend in the second half as well, but is expected to be slightly above the previous forecast of 3.3% this year due to accumulated cost pressures and favorable demand in services. 

As for domestic financial and foreign exchange markets, major price variables have fluctuated, affected by changes in expectations of monetary policy in major countries. Long- and short-term Korean Treasury bond yields have risen in line with government bond yields in major countries, and the Korean won to U.S. dollar exchange rate has fluctuated recently at around the upper-1,200 won level, after rising to the 1,330 won level. Meanwhile, liquidity risks increased at some non-bank institutions due to the rapid rise in delinquency rates and ensuing fears, but then have subsided. 

Looking at household debt and the housing market, the extent of the decline in nationwide housing prices has narrowed significantly. In Seoul and its surrounding areas, apartment prices shifted to an increase as the sluggishness in purchase sentiment eased and as the number of transactions increased. Affected by this, household loans, mainly driven by housing-related loans, increased by a larger extent in May and June after shifting to an increase in April.

The Board decided today to leave the Base Rate unchanged at 3.50% in consideration of the abovementioned domestic and external conditions. Although inflation has slowed, it is forecast to pick up again to around the 3% level since August and to remain above the target level for a considerable time. Also, there is a need to further monitor monetary policy in major countries and household debt trends. The Board therefore judged that it is appropriate to maintain its current restrictive policy stance.

All the Board members unanimously supported the decision.

Looking ahead, it is forecast that there will be a considerable period of time before inflation converges on the target level. Also, there still remain uncertainties related to the degree of further tightening of monetary policy in major countries and its effects on the foreign exchange sector. In addition, there is a need to be attentive to household debt trends. The Board therefore deems it warranted to maintain the restrictive policy stance for a considerable time.

In this process, the Board will judge whether the Base Rate needs to rise further while thoroughly assessing the pace of inflation slowdown, financial stability risks, economic downside risks, and monetary policy changes in major countries and its effects on the foreign exchange sector.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 3.50% for the intermeeting period. It is forecast that inflation will remain above the target level for a considerable time although it is projected to continue to slow. The Board, therefore, sees that it is appropriate to maintain its current restrictive policy stance. Regarding the need to raise the Base Rate further, the Board will make a judgement while assessing the changes in domestic and external policy conditions.

The currently available information suggests that global economic growth has been more favorable than expected, but growth is projected to gradually slow due to the restrictive monetary policy stance being sustained in major countries and due to the contraction in bank credit supply. Global inflation still remains high, while continuing its slowdown, and core inflation is declining at a relatively slow pace.

In global financial markets, the U.S. dollar initially weakened as the U.S. Federal Reserve signaled a potential end to rate hikes, but then it has fluctuated since mid-May affected by economic indicators exceeding market expectations and by developments in U.S. debt ceiling negotiations. Long-term government bond yields in major countries have risen after having fluctuated within a narrow range. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected by the pace of global inflation slowdown, monetary policy changes in major countries, U.S. dollar trends, risks to small and medium-sized U.S. banks, debt ceiling negotiations in the U.S., and the recovery in the Chinese economy.

Domestic economic growth has continued to slow, with ongoing sluggishness of exports and investment, although private consumption has shown a modest recovery led by services. Labor market conditions have generally continued to be favorable, but the increase in the number of persons employed has declined due to the economic slowdown. Going forward, domestic economic growth is expected to remain weak for some time. From the second half of this year, however, it is expected to recover gradually with an easing of the sluggishness in the IT industry and the impact of the Chinese economic recovery. GDP growth for this year is projected to be 1.4%, lower than the February forecast of 1.6%, but uncertainties regarding the timing of a rebound in the IT industry, the domestic impact of the recovery in the Chinese economy, and economic growth in major advanced countries are all judged to be high.

Consumer price inflation has continued to moderate as expected, declining from 4.2% in March to 3.7% in April. This is mainly because the decline in the price of petroleum products has widened and the rise in the prices of processed food products has weakened. Core inflation (excluding changes in food and energy prices from the CPI) has stayed at 4.0%, and short-term inflation expectations among the general public have moved down to 3.5% in May. Looking ahead, it is forecast that consumer price inflation will fall considerably owing to the base effect from the sharp rises in global oil prices last year, and then will rise slightly and fluctuate at around the 3% level until the end of this year. Consumer price inflation for this year is expected to be consistent with the February forecast of 3.5%. Meanwhile, it is judged that the pace of core inflation slowdown is likely to be more modest than previously forecast due to accumulated cost pressure and favorable demand in services. Core inflation is projected to be 3.3%, which is higher than the February forecast of 3.0%. The inflation path is likely to be affected by movements of global oil prices and exchange rates, the degree of economic slowdown at home and abroad, and any further increase in public utility fees.

In financial and foreign exchange markets, the Korean won to U.S. dollar exchange rate has fluctuated considerably due to trends in the trade balance, expectations of an end to policy rate hikes by the U.S. Federal Reserve, and negotiations on the U.S. debt ceiling.

Long-term Korean Treasury bond yields have shown a modest increase, influenced by the movements of government bond yields in major countries. Household loans have slightly increased and the extent of the decline in housing prices has narrowed.

The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over the medium-term horizon as it monitors economic growth, while paying attention to financial stability. Domestic economic growth is expected to remain low, but inflation is projected to remain above the target level for a considerable time. Moreover, uncertainties surrounding the policy decision are judged to be high. The Board, therefore, will maintain a restrictive policy stance for a considerable time with an emphasis on ensuring price stability. Regarding the need to raise the Base Rate further, the Board will make a judgement while thoroughly assessing the pace of inflation slowdown, the economic downside risks and financial stability risks, the effects of the Base Rate raises, and monetary policy changes in major countries.

Opening Remarks to the Press Conference (May 25, 2023)

Today, the Monetary Policy Board (MPB) of the Bank of Korea decided to leave the Base Rate unchanged at 3.50%. I will first go over financial and economic conditions at home and abroad, and then explain the background to today’s Base Rate decision.

To begin, a look at the changes in external conditions since the April meeting shows that global economic growth has been more favorable than expected, but the growth is projected to slow gradually due to continued restrictive monetary policy stances and banking sector stress in major countries. In the U.S. and the euro area, while labor markets remain robust, consumption and investment have been slowing owing to high inflation and the increase in interest rates. A contraction in credit supply following instability at small and medium-sized banks is likely to further slow the growth. The Chinese economy continues to recover, driven mainly by services consumption, but the manufacturing sector is recovering at a slower pace than expected due to high inventory levels.

Inflation in major countries has continued to slow, but the pace of slowdown has been moderate. In the U.S., consumer price inflation declined only by 0.1%p to 4.9% in April from the 5.0% in March. Core inflation has been sticky, staying at around 5.5% to 5.6% since January this year.

As for global financial markets, major price variables have been volatile, mainly affected by changes in expectations for the U.S. Federal Reserve’s monetary policy. The U.S. dollar had weakened as the Federal Reserve signaled a potential end to rate hikes, and then has fluctuated substantially since mid-May, influenced by U.S. economic indicators exceeding market forecasts and by U.S. debt ceiling negotiations. Long-term government bond yields in major countries have also increased since mid-May.

Looking at the Korean economy, although growth turned positive in the first quarter, it continues to slow weighed down by continued sluggishness in exports and investment. Consumption is recovering, but at a modest pace. Exports have continued to fall and investment growth has been slow due to sluggishness in the IT industry and the limited spillover from the Chinese economic recovery.

Concerning inflation, consumer price inflation in April was 3.7%, falling into the 3% range for the first time since February 2022. Although consumer price inflation still remains high, it has continued to slow as previously forecast, with the decline in petroleum product prices widening and prices of processed food products increasing at a slower pace. Short-term inflation expectations have also declined to 3.5% in May from the 3.7% in the previous month. However, core inflation remained unchanged in April from the 4.0% of the previous month as prices of personal services sustained their strong uptrend.

As for domestic financial and foreign exchange markets, volatility has heightened since mid-May, affected mainly by global financial market movements. Long-term Korean Treasury bond yields fluctuated within a narrow range, but then have risen along with government bond yields in major countries, and short-term interest rates have also shown a considerable increase. The Korean won to U.S. dollar exchange rate has fluctuated greatly, affected by expectations of an end to rate hikes by the U.S. Federal Reserve, negotiations on the U.S. debt ceiling, and trends in the trade balance.

Looking at household debt and the housing market, household loans in the financial sector increased slightly in April while the extent of the decrease in housing prices has narrowed.

In addition, the Board has revisited its review of inflation and growth trends, reflecting changes in domestic and external conditions since the February Economic Outlook.

GDP growth for this year is projected to be 1.4%, below the February forecast of 1.6%. This downward adjustment is mostly attributable to the fact that the recovery in the IT industry and the impacts of China’s economic reopening are slower than initially anticipated. The Board sees that, from the second half of this year, the trend of growth in the domestic economy is expected to improve gradually, with those external constraints easing somewhat. However, there are high uncertainties related to the timing of a rebound in the IT industry, the degree of the impacts of the Chinese economic recovery, and economic growth in major advanced countries.

Consumer price inflation is projected to decline significantly in June and July due to the increasing base effect of global oil prices, and then rise slightly to fluctuate at around 3% until the year-end. Consumer price inflation for this year is expected to be consistent with the February forecast of 3.5%. Core inflation is also expected to decline gradually from May. However, the pace of slowdown in core inflation is projected to be more moderate than previously expected, due to accumulated cost pressures and favorable demand in services. Accordingly, core inflation for this year is projected to be 3.3%, higher than the February forecast of 3.0%. This inflation path is likely to be affected by movements of global oil prices and exchange rates, the degree of economic slowdown at home and abroad, and any further increases in public utility fees.

I would like to remind you that the Director General of our Research Department will explain the details of the Economic Outlook this afternoon.

The Board decided today to leave the Base Rate unchanged at 3.50%. It is forecast that inflation will remain above the target level for a considerable time although it has continued to slow. The Board therefore judged that it is appropriate to maintain its current restrictive policy stance.

All the Board members supported the decision unanimously.

Looking ahead, it is forecast that there will be a considerable period of time before inflation stabilizes at the target level and also there still remains uncertainties regarding the pace of core inflation slowdown. The Board therefore deems it warranted to judge whether the Base Rate needs to rise further while maintaining the restrictive policy stance for a considerable time. In this process, the Board will operate monetary policy in a sophisticated manner while thoroughly assessing several uncertainty factors. These include ① the pace of inflation slowdown, ② the U.S. Federal Reserve’s monetary policy, ③ the timing of the rebound in the IT industry, ④ the domestic impacts of the Chinese economic recovery, and ⑤ financial stability conditions at home and abroad.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 3.50% for the intermeeting period. It is forecast that inflation will continue to be above the target level for a considerable time although it is projected to continue to slow, and uncertainties surrounding the policy decision are also judged to be high with increasing risks to the financial sector in major countries. The Board, therefore, sees that it is appropriate to judge whether the Base Rate needs to rise further while assessing the pace of inflation slowdown, financial stability conditions and developments in other uncertainties.

The currently available information suggests that the recovery of global economic growth has been more favorable than expected, but economic downside risks have increased due to heightened risks in the financial sector in major countries since the failure of Silicon Valley Bank in the U.S. Global inflation still remains high while continuing its slowdown, and core inflation is declining at a relatively slow pace. In global financial markets, the volatility of major price variables has increased significantly, affected by risks to the financial sector and changes in expectations for the U.S. Federal Reserve’s monetary policy. As financial unrest has weakened expectations of tightening by the U.S. Federal Reserve, the U.S. dollar has shown a downtrend after having strengthened until early March. Long-term market interest rates in major countries have also fallen significantly since mid-March, after having continued to rise. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected by the pace of global inflation slowdown, risks to the financial sector, monetary policy changes in major countries, U.S. dollar trends, and the recovery in the Chinese economy.

Domestic economic growth has continued to slow with exports continuing to decrease significantly due to deepened sluggishness in the IT industry, although private consumption has somewhat recovered from its slowdown in the fourth quarter last year. Labor market conditions have generally continued to be favorable, but the decline in the increase in the number of persons employed has continued due to the economic slowdown. Going forward, domestic economic growth is expected to remain weak until the first half of this year, affected by the global economic slowdown and the Base Rate raises. From the second half of this year, it is expected to recover gradually with an easing of the sluggishness in the IT industry and the impact of the Chinese economic recovery. GDP growth for this year is projected to be slightly below the February forecast of 1.6%, but uncertainties regarding the outlook are judged to be high.

Consumer price inflation has continued to moderate at 4.2% in March, declining from 4.8% in February. This is mainly because the decline in the price of petroleum products has widened and the sustained rise in the prices of processed food products has weakened. Core inflation (excluding changes in food and energy prices from the CPI) in March has run at 4.0%, the same as in February. Short-term inflation expectations among the general public have run at 3.9%, which is slightly lower than in February. Looking ahead, it is forecast that consumer price inflation will continue to moderate and decline to the 3% range from the second quarter this year, owing to the base effect from the sharp rises in global oil prices last year and weakening pressure from the demand side. Consumer price inflation for this year is expected to be consistent with the February forecast of 3.5%. Meanwhile, it is judged that core inflation is likely to be somewhat higher than the February forecast of 3.0% for this year, considering its slow pace of decline recently. Uncertainty surrounding inflation forecasts is judged to be high regarding movements of global oil prices and exchange rates, the degree of economic slowdown at home and abroad, and the time and size of the increases in public utility fees.

In financial and foreign exchange markets, major price variables have become more volatile, affected mainly by global financial market movements. Long-term market interest rates have shown a considerable increase along with government bond yields in major countries until early March, and then they fell significantly after the failure of Silicon Valley Bank. The Korean won to U.S. dollar exchange rate has been fluctuating considerably, affected by trends in the trade balance, concerns about financial unrest in major countries, and weakening expectations of tightening by the U.S. Federal Reserve. Household loans and housing prices have continued to go downward, but to a lesser extent.

The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over the medium-term horizon as it monitors economic growth, while paying attention to financial stability. Inflation is projected to remain high above the target level for a considerable time despite the slowdown of the domestic economic growth rate and inflation. Moreover, uncertainties surrounding the policy decision are judged to be high. The Board, therefore, deems it warranted to judge whether the Base Rate needs to rise further while maintaining the restrictive policy stance for a considerable time with an emphasis on ensuring price stability. In this process the Board will thoroughly assess the pace of inflation slowdown, the economic downside risks and financial stability risks, the effects of the Base Rate raises, and monetary policy changes in major countries.

Opening Remarks to the Press Conference (April 11, 2023) 

Today, the Monetary Policy Board (MPB) of the Bank of Korea decided to leave the Base Rate unchanged at 3.50%. I will first go over financial and economic conditions at home and abroad, and then explain the background to today’s Base Rate decision in detail.

To begin, a look at the changes in external conditions since the February meeting shows that the global economy has faced greater economic uncertainties as the risks to the financial sector increased with the failure of Silicon Valley Bank (SVB). In the U.S. and the euro area, which had shown a stronger-than-expected recovery until February, economic downside risks have risen since March, with greater risk to financial stability amid banking sector stress and with signs of a slowdown in labor markets. The Chinese economy continues to recover after the re-opening, driven by domestic demand, but its exports remain sluggish.

Global inflation has slowed gradually from the previous high levels. However, core inflation has been sticky, declining at a slow pace in the U.S. and continuing to rise in the euro area.

As for global financial markets, volatility of major price variables has heightened significantly, affected by risks to the financial sector and the changes in expectations for the U.S. Federal Reserve’s monetary policy. The U.S. dollar, which had strengthened until early March amid expectations of further tightening by the U.S. Federal Reserve, weakened considerably as the expectations subsided after the failure of SVB. Long-term market interest rates in major countries, which had sustained an uptrend, also fell significantly since March. 

Looking at the Korean economy, growth continues to slow, affected by the global economic slowdown and the accumulated Base rate hikes. Although the sluggishness in consumption has somewhat eased, as exports continued to decline significantly, growth in the first quarter is forecast to only turn slightly positive. GDP growth for this year is projected to be slightly below the February forecast of 1.6%, affected by the deepened sluggishness in the IT industry. Domestic economic growth is expected to remain weak until the first half of this year, but it is expected to improve gradually from the second half of this year, with an easing of the sluggishness in the IT industry and the impact of the Chinese economic recovery.

Concerning inflation, consumer price inflation in March was still high at 4.2%, but it declined from 4.8% in February continuing its slowing trend since the second half of last year. This is mainly because the decline in the prices of petroleum products has widened due to the base effect of a surge in global oil prices last year, and the sustained rise in the prices of processed food products has begun to weaken. However, core inflation and short-term inflation expectations in March recorded 4.0% and 3.9%, respectively, staying the same or declining only slightly from the 4.0% of the previous month. Going forward, consumer price inflation is projected to sustain its slowing trend and decline to the 3% range in the second quarter, and reach around 3% at the year-end. Consumer price inflation for this year is forecast to be generally consistent with the February forecast of 3.5%. Meanwhile, it is judged that core inflation is likely to be somewhat higher than the February forecast path, given its slow pace of decline recently. However, there are still high uncertainties on the inflation forecast regarding global oil price movements in line with production cuts by oil-producing countries, the degree of economic slowdown at home and abroad, and the time and size of the increases in public utility fees.

As for domestic financial and foreign exchange markets, the direct impact from the SVB failure has been limited, but the volatility of price variables has heightened affected by global financial market movements. The Korean won to U.S. dollar exchange rate has fluctuated at around the 1,300-won range due to a mixture of upside factors including greater risks to the financial sector in major countries and a continued trade deficit, as well as downside factors including weakened expectations of tightening by the U.S. Federal Reserve. Long-term market rates rose substantially until early March along with government bond yields in major countries, and they both fell after mid-March.

Looking at household debt and the housing market, the decline in household loans and the fall in housing prices have continued, but the extent of the decrease has narrowed.

The Board decided today to leave the Base Rate unchanged at 3.50%. It is forecast that inflation will remain above the target level for a considerable time although it is projected to continue to slow. Also, uncertainties surrounding the policy decision are high with increasing risks to the financial sector in major countries. The Board, therefore judged that, while leaving the rate unchanged at the current level, it is appropriate to monitor the pace of inflation slowdown, financial stability conditions, and the development in other uncertainties.

All the Board members supported the decision unanimously.

Looking ahead, the Board deems it warranted to judge whether the Base Rate needs to rise further while maintaining the restrictive policy stance for a considerable time. This is attributable to the fact that inflation is still high and it is expected to remain above the target level throughout the year even if it continues to slow as currently forecast. It is too early to be relieved that prices will stabilize. In this process, the Board will operate monetary policy in a sophisticated manner while thoroughly assessing the pace of inflation slowdown, risks to the domestic and global financial sector, the U.S. Federal Reserve’s monetary policy operation, the impact of the Chinese economic recovery on the domestic economy, and the effects of accumulated Base Rate hikes.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 3.50% for the intermeeting period. It is forecast that inflation will continue to be above the target level throughout the year although it is projected to gradually decrease, and uncertainties surrounding the policy decision are also judged to be high. The Board, therefore, sees that it is appropriate to judge whether the Base Rate needs to rise further while assessing the pace of inflation slowdown and developments in the uncertainties.

Currently available information suggests that the slowdown of global economic growth and inflation has continued. However, concerns about a recession in major countries have somewhat decreased due to the easing of concerns over energy supply and demand, as well as labor market conditions continuing to be favorable, and the pace of inflation slowdown in the U.S. has been modest. In global financial markets, volatility in major price variables has increased. The U.S. dollar has shifted to a rapid strengthening after continuing to weaken, and long-term market interest rates have rebounded considerably, led by expectations that the U.S. Federal Reserve’s terminal rate will be higher than previously expected after the announcement of U.S. labor market and price indicators exceeding market expectations. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the pace of global inflation slowdown, monetary policy changes in major countries and U.S. dollar trends, the recovery in the Chinese economy after the easing of its COVID-19 restrictions, and geopolitical risks.

Although concerns about a recession in major countries have eased, domestic economic growth has continued to slow, with the recovery in private consumption weakening and exports continuing to decrease due to deepened sluggishness in the IT industry. Labor market conditions have generally continued to be favorable, but the decline in the increase in the number of persons employed has continued due to the economic slowdown. Going forward, domestic economic growth is expected to remain weak, affected by the global economic slowdown and the increase in interest rates. Domestic economic growth is expected to improve gradually from the second half of this year with a recovery in the Chinese economy and in the IT industry. However, uncertainties regarding the outlook are judged to be high. GDP growth for this year is projected to be 1.6%, slightly lower than the November forecast of 1.7%.

Consumer price inflation has run at 5.2% in January, which has been higher than the 5.0% in December, due to increases in electricity fees as well as rising prices of processed food products, although increases in the price of petroleum products have moderated. Core inflation (excluding changes in food and energy prices from the CPI) has run at 4.1% in January. Short-term inflation expectations among the general public have run at 4.0% in February. Looking ahead, it is forecast that consumer price inflation will remain around 5% in February, but will gradually decrease owing to the base effect from the sharp rises in global oil prices last year and weakening pressure from the demand side. However, the pace of slowdown is expected to be more modest than in major countries due to the effects of the increases in public utility fees. Consumer price inflation for this year is projected to be 3.5%, slightly lower than the November forecast of 3.6%. Uncertainty surrounding inflation forecasts is judged to be high, regarding movements of global oil prices and exchange rates, the degree of economic slowdown at home and abroad, and the size and effects of the increases in public utility fees.

In financial and foreign exchange markets, volatility has increased in February with a considerable rebound in the Korean won to U.S. dollar exchange rate and in market interest rates, which have shown a decrease since last November due to the possibility of further tightening of the U.S. Federal Reserve’s policy stance. The decrease in household loans has widened, and housing prices have continued to decline across all parts of the country.

The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over the medium-term horizon as it monitors economic growth, while paying attention to financial stability. Inflation is projected to remain high above the target level although the domestic economic growth rate has slowed, and uncertainties surrounding the policy decision are high. The Board, therefore, deems it warranted to judge whether the Base Rate needs to rise further while maintaining the restrictive policy stance for a considerable time with an emphasis on ensuring price stability. In this process the Board will thoroughly assess the pace of inflation slowdown, the economic downside risks and financial stability risks, the effects of the Base Rate raises, and monetary policy changes in major countries.

Opening Remarks to the Press Conference (February 23, 2023)

Today, the Monetary Policy Board (MPB) of the Bank of Korea decided to leave the Base Rate unchanged at 3.50%. I will first go over financial and economic conditions at home and abroad, and then explain the background to today’s Base Rate decision in detail.

First, looking at the changes in external conditions since the January MPB meeting, the global economy has seen growth and inflation slow, but the pace of the slowdown has moderated more than initially expected. In the U.S. and the euro area which had high concerns for a recession, expectations for a soft landing have heightened as favorable labor market conditions have continued and concerns over energy supply and demand have eased due to warm winter weather. In China, the recovery of economic activity has been more rapid than expected since the easing of COVID restriction policies. Inflation in major countries has declined gradually from the high levels, but the pace of decline has been slow, with U.S. consumer price inflation for January recording 6.4%, only a 0.1%p drop from the 6.5% in December.

As for global financial markets, volatility of major price variables has heightened as uncertainties over the U.S. Federal Reserve’s terminal rate have increased. The U.S. dollar, which had weakened affected by the Federal Reserve’s adjustment of the pace of rate hikes, shifted to a substantial and rapid strengthening in February as U.S. labor and inflation indicators exceeded market expectations. Long-term market interest rates in major countries, which had continued a declining trend, have risen considerably since February. As consumer price inflation in Japan has risen recently, uncertainties regarding the monetary policy by the Bank of Japan as well as the Federal Reserve have also increased.

The Korean economy has continued to slow. Although the global economy slowed by less than expected, exports continued to decline due to deepened sluggishness in the IT industry and recovery in private consumption weakened, affected by high inflation and the increase in interest rates.

Concerning inflation, consumer price inflation rose to 5.2% in January from 5.0% in the previous month. This is largely because electricity fees increased, and the prices of processed food products and other items maintained high upward trends, although increases in petroleum product prices have moderated. Core inflation recorded 4.1% in January and short-term inflation expectations stood at 4.0% in February.

Volatility has heightened in domestic financial and foreign exchange markets. Market interest rates have rebounded from an earlier significant decline affected by movements in Treasury bond yields in major countries. The Korean won to U.S. dollar exchange rate had dropped to the lower-1,200 won range, but has recently increased to around 1,300 won, in line with the shift to U.S. dollar strengthening.

Looking at household debt and the housing market, housing sales prices in both the Seoul metropolitan area and in other regions have continued to decrease. Household loans have declined significantly, led by increases in interest rates and the sluggishness in the housing market.

The Board has revisited its review of future inflation and growth trends, reflecting changes in internal and external conditions since the November MPB meeting. First, GDP growth for this year is projected to be 1.6%, which is slightly below the November forecast of 1.7%. This projection comprehensively reflects both the upward adjustment factors (+0.2%p), such as the possibility of a soft landing in the United States and in Europe, and the downward adjustment factors (-0.3%p), including the sluggishness in the IT industry and domestic real estate market. The economy is expected to improve gradually going into the second half of this year. However, there are still high uncertainties related to monetary policies in major economies, the recovery in the Chinese economy, and the domestic real estate market.

Consumer price inflation is expected to be around 5% in February and drop significantly in March, owing chiefly to the base effect of a surge in global oil prices last year. It will continue its downward trend to hit the lower-3% range at the end of this year mainly affected by the weakening of demand-side pressure. As a result, annual inflation is projected to reach 3.5%, slightly below the November forecast of 3.6%. Compared to major economies, the level of inflation in Korea will likely be lower, while the pace of slowdown is expected to be more moderate, due to the effects of the increases in public utility fees. Concerning this inflation forecast, uncertainties remain high regarding movements of global oil prices and the exchange rate, the degree of economic slowdown at home and abroad, and the effects of the increases in public utility fees.

The Board decided today to leave the Base Rate unchanged at 3.50%. It is forecast that inflation will continue running above the target level throughout the year although it is projected to gradually decrease. Also, uncertainties surrounding policy decisions are high. The Board therefore judged that, while leaving the rate unchanged at the current level, it is appropriate to closely monitor developments of several uncertainty factors. They include ① the pace of inflation slowdown, ② the U.S. Federal Reserve’s terminal rate, ③ the effects of China’s economic recovery on the domestic economy, ④ the effects of a sluggish domestic real estate market on financial stability, and ⑤ the effects of accumulated Base Rate hikes.

One members―Cho Yoon-Je―voted against the decision to leave the Base Rate unchanged, proposing to raise it by 25 basis points.

Looking ahead, the Board will judge whether the Base Rate needs to rise further while maintaining its restrictive policy stance for a considerable time. This is attributable to the fact that inflation throughout the year is expected to run above the target level, even if the trend of inflation going forward is consistent with the current forecast. In this process, the Board will operate monetary policy in a sophisticated manner while thoroughly assessing developments of the abovementioned uncertainties and their effects.

Finally, I would like to emphasize once again that, against a backdrop of greater uncertainty than ever, the decision to leave the Base Rate unchanged at today’s meeting was taken, after having raised it at every MPB meeting since last April.

Also, I don’t want today’s decision to be seen as the end of the rate hikes.

Although the Board raised the Base Rate at every meeting due to exceptionally high inflation last year, previously it was ordinary to pause after raising the rate to examine the need for further increases. Today’s decision could be understood as returning to this usual way in the past.

The Monetary Policy Board of the Bank of Korea decided today to raise the Base Rate by 25 basis points, from 3.25% to 3.50%. The Board judges that the additional 25 basis points hike is warranted to ensure price stability, as inflation still remains high and is projected to be above the target level for a considerable time, although the domestic economic growth rate is expected to be below the November forecast.

Currently available information suggests that the global economic slowdown has continued, affected by ongoing high inflation and the resultant policy rate hikes in major countries, although inflation is starting to slow due to the decline in global oil prices. In global financial markets, the US dollar has continued to weaken due to the adjustment to the pace of the US Federal Reserve's policy rate hikes and prospects of strengthening monetary tightening, such as at the European Central Bank. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the pace of global inflation slowdown, monetary policy changes in major countries and US dollar trends, developments in the Chinese economy after the easing of its COVID-19 restriction policies, and geopolitical risks.

Domestic economic growth has continued to slow with exports decreasing significantly and the recovery in private consumption weakening. Labor market conditions have generally continued to be favorable, but the decline in the increase in the number of persons employed has continued due to the economic slowdown. Going forward, domestic economic growth is expected to weaken, affected by the global economic slowdown and the increase in interest rates, and GDP growth for this year will be below the November forecast of 1.7%. As for the economic outlook, uncertainties regarding the pace of recovery in the Chinese economy and an economic slowdown in major countries are both judged to be high.

Consumer price inflation has remained high at 5.0% in December driven by accelerating price increases in processed food products, with the continuing effects of electricity and gas fee hikes, although increases in the price of petroleum products have moderated. Core inflation (excluding changes in food and energy prices from the CPI) has fallen slightly to within the lower-4% range, and short-term inflation expectations of the general public have slowed to the upper-3% range, but they have continued to stay high. Looking ahead, it is forecast that consumer price inflation will remain around 5% in January and February, but will gradually decrease due to the base effect and weakening pressures from the demand side. Consumer price inflation for this year is expected to be generally consistent with the November forecast of 3.6%. Uncertainty surrounding inflation forecasts is judged to be high, regarding the degree of economic slowdown at home and abroad, the size of the increases in electricity and gas fees and public utility fees, and movements of global oil prices and exchange rates.

In financial and foreign exchange markets, unrest has been eased by market stabilization measures and adjustments to the pace of the US Federal Reserve’s policy rate hikes. Long-term market interest rates have fallen, spreads on corporate bonds and commercial paper have narrowed, and the Korean won to US dollar exchange rate has decreased significantly. However, high credit risk aversion is continuing among non-prime bonds and project financing asset-backed commercial paper (PF-ABCP). Household loans have continued to decrease, and the decline in housing prices has widened significantly across all parts of the country.

The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over the medium-term horizon as it monitors economic growth, while paying attention to financial stability. The Board deems it warranted to maintain the restrictive policy stance with an emphasis on ensuring price stability, as inflation is expected to remain high above the target level, although the domestic economic growth rate has slowed. Meanwhile, the Board will judge whether the Base Rate needs to rise further while thoroughly assessing the economic downside risks and financial stability risks, the effects of the Base Rate raises, the pace of inflation slowdown, and monetary policy changes in major countries.

Opening Remarks to the Press Conference

Today, the Monetary Policy Board (MPB) of the Bank of Korea decided to raise the Base Rate by 25 basis points, from 3.25% to 3.50%.

I will first go over financial and economic conditions at home and abroad, and then explain the background to today’s Base Rate decision in detail.

First, looking at the changes in external conditions since the November MPB meeting, the global economy has continued to slow, affected by ongoing high inflation and the resultant policy rate hikes in major countries, although inflation is starting to slow due to falling global oil prices. Specifically, the U.S. economy has seen slowing growth, mainly in consumption. The euro area now faces a higher chance of negative growth, due to sustained slumps in consumption and investment. In China, domestic demand and exports continue to stagnate amid the virus surge, despite an earlier-than-expected easing of its COVID restriction policies. As for global financial markets, major price variables have generally shown reduced volatility, with the U.S. dollar remaining weak, reflecting the U.S. Federal Reserve’s adjustment of its policy rate hike pace at the December FOMC meeting.

The Korean economy has continued to slow. Exports dropped sharply due to a slowdown in major trading partners’ economies and in the IT business. Consumption has also shown weaker recovery momentum, as the boosted demand during the normalization of economic activities has gradually slowed along with interest rate hikes. With the domestic economy continuing its slowdown, the GDP growth for this year is expected to be below the November forecast of 1.7%. The economy is projected to improve gradually going into the second half of this year, driven by recoveries in the Chinese economy and in the IT business. However, there are still high uncertainties related to the pace of recovery in the Chinese economy as a result of the easing of COVID restriction policies and to the degree of the economic slowdown in major economies.

Concerning inflation, consumer price inflation remained high, at 5.0% in December. The pace of the price increases of processed food accelerated, with the continuing effects of electricity and gas fee hikes while the rise in the prices of petroleum products slowed. Core inflation has declined slightly to 4.1% and short-term inflation expectations of the general public decreased to 3.8% in December, but they are still at a high level. Going forward, consumer price inflation is projected to be around 5% in January and February, as the accumulated cost pressure is reflected in public utility fees, including electricity and gas fees, and processed food prices, before gradually going down. The annual consumer price inflation for 2023 is expected to be generally in line with the November forecast of 3.6%. However, concerning the price forecasts, uncertainties remain high in terms of the degree of the economic slowdown at home and abroad, the size of the hikes in electricity and gas fees, and movements of global oil prices and the exchange rate.

In the domestic financial and foreign exchange markets, the market unrest seems to have eased thanks to market stabilization measures by the government and the Bank of Korea, and adjustments to the pace of the US Federal Reserve’s policy rate hikes. Long-term market interest rates have fallen, corporate bond and CP spreads have declined significantly, and the Korean won to U.S. dollar exchange rate has dropped to the mid-1,200 won range. However, there is still a high level of credit-risk aversion against non-prime bonds and PF-ABCP in the financial markets due to concerns over the sluggish real estate market. Exchange rates also remain highly uncertain, in line with the U.S. Federal Reserve’s monetary policy decisions and movements of the Chinese yuan and the Japanese yen.

Looking at household debt and the housing market, housing prices in both the Seoul metropolitan area and other regions have declined significantly. Household loans have continued to decrease, led by unsecured loans, due to rising borrowing rates and the sluggishness in the housing market.

The Board decided today to raise the Base Rate from 3.25% to 3.50%. The Board judged that today’s 25 basis-point increase is warranted to achieve price stability, given that inflation, still remaining at a high level, is projected to run above the target level for a considerable time, although the GDP growth rate for this year is expected to be below the November forecast.

Two members―Joo Sangyong and Shin Sung Hwan―voted against the decision to raise the Base Rate by 25 basis points, proposing to maintain the Base Rate at the current level of 3.25%.

Looking ahead, the Board deems it warranted to maintain its restrictive policy stance with a focus on price stability going forward, as inflation this year is expected to run above the target level while gradually moderating after March. Meanwhile, the Board will judge whether the Base Rate needs to rise further while thoroughly assessing the economic downside risks and financial stability risks, the effects of the Base Rate raises, the pace of inflation slowdown, and monetary policy changes in major countries.

(Statement)

The Monetary Policy Board of the Bank of Korea decided today to raise the Base Rate by 25 basis points, from 3.00% to 3.25%. The Board judges that the policy response to ensure price stability should be continued as inflation has remained high. The size of the Base Rate hike was judged to be appropriate at 25bp, in overall consideration of the easing of risks in the foreign exchange sector and the contraction of short-term financial markets, while the economic slowdown is expected to be greater than forecast in August.

Currently available information suggests that the global economic slowdown has continued, affected by the high inflation, ongoing policy rate hikes in major countries and the prolonged Ukraine crisis. In global financial markets, the US dollar has weakened and long-term market interest rates have fallen, as risk aversion has partly subsided on the expectations of an adjustment to the pace of the US Federal Reserve's policy rate hikes. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the movements of international commodity prices and global inflation, monetary policy changes in major countries and US dollar trends, and geopolitical risks.

Domestic economic growth has continued to slow with exports shifting to a decrease, although private consumption has maintained its recovery trend. Labor market conditions have continued to be favorable with a low unemployment rate, despite a slowing increase in the number of persons employed. Going forward, domestic economic growth is expected to weaken, affected by the global economic slowdown and the increase in interest rates. GDP growth for this year will be consistent with the August forecast of 2.6%, but that for next year is projected to be 1.7%, considerably lower than the August forecast of 2.1%.

Consumer price inflation has remained high at 5.7% in October due to increases in electricity and gas fees and the accelerating price increases in processed food products, although increases in the prices of petroleum products have moderated. Core inflation (excluding changes in food and energy prices from the CPI) and the inflation expectations of the general public have stayed high at the lower-4% level. Looking ahead, it is forecast that consumer price inflation will somewhat decrease due to the base effect and the economic slowdown, but will remain high at the 5% level for some time. Consumer price inflation is projected to be 5.1% in 2022 and 3.6% in 2023, slightly below the August forecast of 5.2% in 2022 and 3.7% in 2023, but uncertainties are judged to be high related to the movements of exchange rates and global oil prices, the degree of economic slowdown at home and abroad, and the size of increases of electricity and gas fees.

In the financial and foreign exchange markets, the long-term Korean Treasury bond yield and Korean won to US dollar exchange rate have decreased and stock prices have risen due to expectations of an adjustment to the pace of monetary tightening in major countries. However, in the short-term financial markets, yields on project financing asset-backed commercial paper (PF-ABCP) have risen significantly and their transactions have shrunk. Household loans have increased only slightly and housing prices have further decreased in all parts of the country.

The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over a medium-term horizon as it monitors economic growth, while paying attention to financial stability. The Board sees continued rate hikes as warranted for some time, as inflation is expected to remain high, substantially above the target level, although the domestic economic growth rate has slowed. In this process the Board will determine the size and pace of further increases of the Base Rate while thoroughly assessing the degree of persistence of high inflation, the pace of growth, monetary policy changes in major countries, financial stability conditions, and geopolitical risks.

Opening Remarks to the Press Conference (November 24, 2022)

Today, the Monetary Policy Board (MPB) of the Bank of Korea decided to raise the Base Rate by 25 basis points, from 3.00% to 3.25%. I’ll first go over financial and economic conditions both at home and abroad, and then explain the background to today’s Base Rate decision in detail.

First, looking at the changes in external conditions since the October MPB meeting, the global economic slowdown continued, due to high inflation and the resultant policy rate hikes in major countries. Specifically, the US economy has seen slowing growth, led by domestic demand. There has been growing concern about economic recession in the euro area, due to energy supply disruptions and heightened price level. The Chinese economy remains sluggish due to declines in property investment and exports. As for the global financial markets, the US Federal Reserve suggested in its November FOMC meeting that it could adjust the pace of its policy rate hikes, although the terminal federal funds rate could be higher than previously expected, and US price indicators also came in below market expectations. Accordingly, risk aversion, which had been greatly heightened, has partially eased. Consequently, the US dollar has weakened significantly, long-term market interest rates in major countries have fallen, and stock prices have risen.

Our domestic economic growth has continued to slow. Although consumption has maintained its recovery momentum, export growth has been slowing rapidly, with exports shifting to a decline in October due to weakening growth in major countries. Turning to inflation conditions, consumer price inflation remained high at 5.7% in October. Although the rise in the prices of petroleum products has slowed, electricity and gas fees have increased further, and prices of processed food have climbed faster. Core inflation and the inflation expectations of the general public are running at 4.2-4.3%.

In the domestic financial markets, long-term Treasury bond yields have declined and stock prices have risen, as the foreign exchange rate stabilized. However, in the money market, interest rates such as those on project financing asset-backed commercial paper have risen sharply, and transactions have shrunk. Such transactions are partially resuming, assisted by market stabilization measures by the Bank of Korea and the government. However, funding in the CP market is still constrained due to credit risk aversion, which has heightened sharply since the Legoland incident, and year-end demand for funds by financial institutions. In the foreign exchange market, strains have been partially eased with the Korean won to US dollar exchange rate falling to mid-1,300 won from the mid-1,400 won level. However, the exchange rate is expected to remain highly volatile for some time, as there are still high uncertainties related to the US Federal Reserve’s monetary policy, China’s Zero-COVID policy, and the resultant movements of the yuan.

Looking at household debt and the housing market, household loans have increased slightly, as the sustained net redemption of unsecured loans offset a rise in housing-related lending. Housing prices have further decreased in both the Seoul metropolitan area and other regions.

In reflection of changes in domestic and external conditions since the August economic outlook, the Bank of Korea has revisited its inflation and growth forecasts. Domestic growth is expected to be lower than previously projected, affected by the global economic slowdown and interest rate increases. The GDP growth rate for this year is projected to be in line with the August forecast of 2.6%, but the growth rate for next year is forecast to be 1.7%, substantially lower than the previous forecast of 2.1%, as exports and investment are likely to be more sluggish than expected along with a moderate recovery in consumption. The lowering of the growth rate for next year is attributed mostly to external factors such as an accelerated slowdown of the global economy, and partially to internal factors such as interest rate increases.

Consumer price inflation is expected to be 5.1% for this year and 3.6% for next year, slightly lower than the August forecasts (5.2% and 3.7%). Despite the projection that the economy would slow further, the downward adjustment to the price forecasts has not been large. This is because the accumulated cost pressure, which has been gradually reflected in electricity and gas fees, processed food, and core items, is expected to largely offset the weakening of the demand pressure from the economic slowdown. With regard to the price forecasts, there are high uncertainties surrounding movements in the exchange rate and oil prices, the degree of economic slowdown at home and abroad, and the size of hikes in electricity and gas fees. Particularly in November, Consumer price inflation could be considerably lower than in October due to the base effects of agricultural and petroleum prices, however the high upward trend at the 5% level is projected to continue through early next year, reflecting the expectation of further increases in electricity and gas fees. The Director General of our Research Department will provide more details about the economic outlook this afternoon.

The Board decided today to raise the Base Rate by 25 basis points. The Board sees it warranted to continue its policy response for price stability as inflation is projected to remain high at the 5% level for some time. Regarding the size of the rate hike, the Board judged that today’s 25 basis-point increase is appropriate, given that the degree of economic slowdown is expected to increase in the future, while the risks in the foreign exchange sector have subsided and funding conditions in short-term financial markets have become constrained.

All the Board members supported the decision unanimously.

Looking ahead, the Bank of Korea deems it warranted to maintain its stance of Base Rate hikes going forward for some time, as inflation is projected to run well above the target level for a considerable time. There are different views among the Board members regarding the level and the timing of the policy rate destination due to high uncertainties surrounding the policy decision. Therefore, the Board will determine the Base Rate in the meetings next January and beyond after closely monitoring policy decisions of the US Federal Reserve, including in the December FOMC meeting, their influence on the foreign exchange market, changes in external conditions such as movements in international commodity prices, the pace of domestic inflation and growth, and financial stability conditions.

(Statement)

The Monetary Policy Board of the Bank of Korea decided today to raise the Base Rate by 50 basis points, from 2.50% to 3.00%. The Board judges that the policy response should be strengthened, as additional inflationary pressures and the risks to the foreign exchange sector have increased affected by the rising Korean won to US dollar exchange rate, while inflation has remained high.

Currently available information suggests that the global economic slowdown has continued, affected by the ongoing high inflation, further tightening of the US Federal Reserve's policy stance and the prolonged Ukraine crisis. In global financial markets, long-term market interest rates have risen significantly and stock prices have fallen, and financial unrest has emerged in some countries, while major currencies have depreciated due to the reinforced trend of US dollar strength. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the movements of international commodity prices and global inflation, monetary policy changes in major countries and US dollar trends, and geopolitical risks.

Domestic economic growth has slowed due to lower export growth, while private consumption has maintained its recovery trend. Labor market conditions have continued to improve, with the year-on-year increase in the number of persons employed remaining high. Going forward, domestic economic growth is expected to slow gradually, affected by the global economic slowdown and the increase in interest rates. GDP growth for this year will be generally consistent with the August forecast of 2.6%, but that for next year is projected to be below the August forecast of 2.1%.

Consumer price inflation has remained high in the mid- to upper-5% range due to the accelerating price increases in personal services and processed food products, although increases in the prices of petroleum products have moderated. Core inflation (excluding changes in food and energy prices from the CPI) and the inflation expectations of the general public have stayed high in the 4% range. Looking ahead, it is forecast that consumer price inflation will remain high in the 5-6% range for a considerable time as the impact of the rising Korean won to US dollar exchange rate acts as additional inflationary pressure. Consumer price inflation will be generally consistent with the August forecast of 5.2% in 2022 and 3.7% in 2023, but upside risks are judged to be high due to the rising Korean won to US dollar exchange rate and production cuts by major oil-producing countries, despite downward pressures from the economic slowdown.

Volatility in domestic financial markets has increased, especially in the foreign exchange sector, as the Korean won to US dollar exchange rate has risen significantly and foreigners’ securities investment funds have shown net outflows, influenced by the strong US dollar and the weak yen and yuan. Long-term market interest rates have risen considerably and stock prices have fallen sharply. Household loans have decreased slightly and housing prices have further decreased.

The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over a medium-term horizon as it monitors economic growth, while paying attention to financial stability. The Board sees continued rate hikes as warranted, as inflation is expected to remain high, substantially above the target level, although domestic economic activity has slowed. In this process the Board will determine the size and pace of further increases of the Base Rate while thoroughly assessing the degree of persistence of high inflation, the pace of growth, monetary policy changes in major countries, financial stability conditions such as capital flows, and geopolitical risks.

Opening Remarks to the Press Conference

The Monetary Policy Board (MPB) of the Bank of Korea decided today to raise the Base Rate by 50 basis points from 2.50% to 3.00%. I will now explain the detailed background to today’s Base Rate decision, after briefly going over global and domestic financial and economic conditions. 

First, looking at the changes in external conditions since the August MPB meeting, projections for the US Federal Reserve’s policy rate destination have increased quite considerably from around 4% to the upper-4% level, adding to concerns about the global economic slowdown and intensifying global financial market volatility. Major advanced economies have been seeing slowing growth driven by high inflation of 8 to 10% and the resultant further tightening by their central banks. The Chinese economy also remains sluggish due to slumps in its property market and exports. In the global financial markets, long-term market interest rates have risen sharply and stock prices have plunged. Major currencies have depreciated as the US dollar strengthened further, resulting in financial strains in some countries. 

Turning to domestic conditions, our growth has been slowing. Although consumption has maintained its recovery momentum, export growth has been on a gradual downturn, affected by the global economic slowdown. We expect this slowing trend to continue going forward. GDP growth for this year is likely to be generally in line with the August projection (2.6%), but for next year it is forecast to stand below that level (2.1%). 

Consumer price inflation continues to be high at the mid- to upper-5% level. The rise in oil prices has slowed, but prices of personal services and processed food have climbed faster. Core inflation and the inflation expectations of the general public remain elevated at the 4% level. Consumer price inflation is expected to run high in the 5-6% range for a considerable time, as the Korean won depreciation adds further upward pressures to prices. Although the consumer price inflation for this year and next will be generally in line with the August projections (5.2% and 3.7%, respectively), we see the upside risk from the weak Korean won and production cuts by major oil-producing countries as outweighing downside pressures from the slowing economy.

In the domestic financial markets, volatility has greatly increased, led by the foreign exchange sector. The Korean won to US dollar exchange rate has risen to well above 1,400 won, and securities investment funds of foreigners switched to a net outflow during September, reflecting strengthening of the US dollar and depreciation of the Japanese yen and the Chinese yuan, combined with the continued trade deficit. Long-term market interest rates have moved up significantly, affected by an increase in government bond yields in major countries, and stock prices have fallen.

Looking at household debt and the housing market, household loans decreased slightly, as the sustained net redemption of unsecured loans more than offset a rise in housing-related lending. Housing prices have further decreased.

The Board decided today to raise the Base Rate by 50 basis points in consideration of the need to strengthen its policy response. Although GDP growth for next year is projected to be below the August forecast, we judged that upside risk to consumer price inflation, which is expected to persist in the high range of 5-6% for a considerable time, has increased as a result of the depreciation of the Korean won. In addition, market expectations for Korean won depreciation have acted in part as a financial instability factor by increasing capital outflow pressure and causing herd behavior in the foreign exchange market. Two members―Joo, Sangyong and Shin, Sung Hwan―voted against the decision to raise the Base Rate by 50 basis points, proposing to raise it by 25 basis points.

Looking ahead, the Board deems it warranted to maintain its stance of Base Rate hikes going forward, as inflation is projected to run above the target level for a considerable time. This stance is expected to help stabilize the foreign exchange market by alleviating concerns over the negative policy rate gap between the Bank of Korea and the US Federal Reserve.

Regarding the size of the policy rate hike in November, there are different views among the Board members and the uncertainties surrounding the policy decision are very high. The Board will determine the size of the next rate hike and the path of further increases after closely monitoring external conditions, such as results of the November FOMC meeting and movements in international commodity prices, and evaluating how these conditions may affect domestic inflation and growth as well as financial and foreign exchange markets.

I would like to make one last remark. The Board is well aware that the public is suffering a heavier burden as the Base Rate is hiked. However, increasing the Base Rate for price stability in the current high-inflation environment will be necessary for some time to prevent the economy as a whole from suffering from a greater loss. The Bank of Korea will do its best to stabilize the economy as quickly as possible.

(Statement)

The Monetary Policy Board of the Bank of Korea decided today to raise the Base Rate by 25 basis points, from 2.25% to 2.50%. The Board judges that the policy response to prevent the entrenchment of high inflation should be continued as inflationary pressures and inflation expectations have remained high, although economic downside risks have increased at home and abroad.

Currently available information suggests that global economic downside risks have increased, affected by the prolonged Ukraine crisis and significant policy rate hikes in major advanced countries, while inflation has remained high. In global financial markets, major price variables have fluctuated significantly due to changes in expectations for the pace of the US Federal Reserve's policy rate hikes. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the movements of international commodity prices and global inflation, economic indicators and monetary policy changes in major countries, and geopolitical risks.

Downside risks to the Korean economy have increased with the slowdown in exports owing to weakening of economic growth in major countries, while private consumption has continued to recover. Labor market conditions have continued to improve, with the year-on-year increase in the number of persons employed remaining high. Going forward, GDP growth is projected to be 2.6% in 2022 and 2.1% in 2023, below the May forecast of 2.7% in 2022 and 2.4% in 2023, as export growth has slowed.

Consumer price inflation has remained high in the 6% range due to the accelerating price increases in agricultural and personal services, although increases in the prices of petroleum products have somewhat moderated. Core inflation (excluding changes in food and energy prices from the CPI) and the inflation expectations of the general public have stayed high in the upper-3% range and the 4% range, respectively. Looking ahead, it is forecast that consumer price inflation could decline due to the decrease in global oil prices but will remain high in the 5-6% range for a considerable time as core inflation continues to rise. Consumer price inflation is projected to be 5.2% in 2022 and 3.7% in 2023, substantially above the May forecast of 4.5% in 2022 and 2.9% in 2023.

Volatility in domestic financial markets has increased, influenced by global financial market movements. Long-term market interest rates have rebounded after a considerable decline, and the Korean won to US dollar exchange rate has risen significantly due to US dollar strengthening. Household loans have decreased slightly and housing prices have shifted to a decrease.

The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over a medium-term horizon as it monitors economic growth, while paying attention to financial stability. The Board sees continued rate hikes as warranted, as inflation is expected to remain high, substantially above the target level, despite the increase in economic downside risks and underlying high uncertainties surrounding domestic and external conditions. In this process the Board will determine the size and pace of further increases of the Base Rate while thoroughly assessing the degree of persistence of high inflation, the pace of growth, financial stability conditions such as capital flows, monetary policy changes in major countries, and geopolitical risks.

Opening Remarks to the Press Conference

Today, the Monetary Policy Board (MPB) of the Bank of Korea decided to raise the Base Rate by 25 basis points, from 2.25% to 2.50%. I’ll first go over global and domestic financial economic conditions and the future outlook, and then explain the background to today’s Base Rate decision in detail.

Looking at the changes in external conditions since the July MPB meeting, we’ve seen mounting concerns about a global economic slowdown, affected by the prolonged Ukraine crisis and significant rate hikes, while inflation has remained high at around 8-10% in major advanced economies. More specifically, the US has recorded a negative growth rate for two consecutive quarters due to a pullback in investment, and the euro area has witnessed a significant worsening of economic sentiment amid weak goods consumption. China’s economy has been sluggish under the effects of its lockdown policy. Major price variables have fluctuated greatly in global financial markets due to the heightened uncertainties surrounding the pace of the US Federal Reserve’s policy rate hikes. Government bond yields in major countries have rebounded after considerable falls, and the US dollar has recently shifted rapidly to appreciation after losing value.

The Korean economy has still continued to recover supported by an improvement in consumption. However, downside risks are higher than before with a decline in export growth affected by weaker economic growth in major countries. Concerning inflation, consumer price inflation has run at the 6% level for two consecutive months and core inflation has stayed at around 4%, owing to the persistence of high inflationary pressures both from the supply and demand sides. The inflation expectations of the general public are in the 4% range.

In the domestic financial markets, the volatility of major price variables has heightened. Long-term market interest rates have rebounded after a considerable decline due to changes in Treasury bond yields in major countries. The Korean won to US dollar exchange rate has risen to around 1,340 won recently. Looking at financial stability, household loans in the financial sector decreased slightly in July, as the sustained net redemption of unsecured loans more than offset a rise in housing-related lending. Housing prices have shifted to a decrease since June.

In reflection of changes in domestic and external conditions since the May economic outlook, the Bank of Korea has revisited its inflation and growth forecasts. Consumer price inflation is now projected to be 5.2% this year, substantially above the May forecast (4.5%), as both supply-side and demand-side pressures have expanded further than previously expected and inflation is becoming more broad-based. Consumer price inflation is possibly lower in August than in July, influenced by a sharp drop in oil prices over the past two months, but it is expected to remain high in the 5-6% range until early next year, considering the high uncertainties associated with future international energy prices due chiefly to the Ukraine crisis and the sustained uptrend in core inflation.

GDP growth is expected to be 2.6% this year, slightly below the previous forecast (2.7%). This reflects the projection that, despite a recovery in private consumption, the slowdown in exports is likely to accelerate gradually from the second half of this year affected by the global economic slowdown. Concerning the economic outlook for next year, although uncertainties remain high, consumer price inflation is projected at 3.7% and growth at 2.1%. This is based on the assumptions that oil prices will fall at a modest pace in line with the global economic slowdown and that geopolitical risks including the Ukraine crisis will decrease gradually. The Director General of our Research Department will provide more details about the economic outlook this afternoon.

The Board today raised the Base Rate by 25 basis points, from 2.25% to 2.50%, in consideration of the need to continue its policy response in furtherance of price stability. All the Board members supported the decision unanimously.

To elaborate more on the decision today, the Board judged that a gradual increase of 25 basis points, as suggested at last month’s meeting, is appropriate since current economic conditions are not far from the Board’s July projections for inflation and growth. That is, since the high inflationary pressure with consumer price inflation in the 5-6% range is expected to persist, the Board sees continued rate hikes as warranted to curb the spread of inflation expectations and prevent the entrenchment of high inflation. On the growth side, despite growing economic downside risks, it would be desirable to respond to the risks after further assessing developments of external conditions as uncertainties associated with the Ukraine crisis and the pace of the US Federal Reserve’s policy rate hikes remain high.

Looking ahead, the Bank of Korea sees it as desirable to conduct monetary policy with a focus placed on inflation and sees continued rate hikes as warranted for some time under the current inflation and growth forecast paths. Particularly since there are very high uncertainties associated with the degree of persistence of high inflation, the pace of growth, financial stability conditions such as capital flows, monetary policy changes in major countries, and geopolitical risks, the Bank of Korea will make sure to closely monitor the relevant developments in its conduct of monetary policy. 

(Statement)

The Monetary Policy Board of the Bank of Korea decided today to raise the Base Rate by 50 basis points, from 1.75% to 2.25%. The Board judges that a pre-emptive policy response to prevent the entrenchment of high inflation is of greater importance for some time as high inflation is continuing and becoming broad-based while short-term inflation expectations are rising sharply, although economic downside risks have increased at home and abroad.

Currently available information suggests that global economic growth has weakened, affected by the prolonged Ukraine crisis, while inflation has remained high. In global financial markets, risk aversion has strengthened due to the acceleration of policy rate hikes in major countries and consequent concerns about economic slowdown. The US dollar has remained strong and stock prices have fallen considerably, while government bond yields in major countries have fluctuated significantly. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by global inflation movements, monetary policy changes in major countries, geopolitical risks, and COVID-19 restrictions in major countries.

The Korean economy has continued to recover. Private consumption has sustained its improvement and sluggishness in facilities investment has eased, while export growth has somewhat slowed. Labor market conditions have continued to improve, with the year-on-year increase in the number of persons employed remaining high. Going forward, while private consumption is likely to sustain its recovery, GDP growth this year is projected to be somewhat below the May forecast of 2.7%, affected by the slowdown in exports owing to weakening of economic growth in major countries. Uncertainties surrounding the economic outlook are judged to be elevated.

Consumer price inflation has risen significantly to 6.0% due to the ongoing sharp rise in the prices of petroleum products and the accelerating price increases in other expenditure categories. Core inflation (excluding changes in food and energy prices from the CPI) and the inflation expectations of the general public have increased to close to 4%. It is forecast that consumer price inflation will remain high at above 6% for some time and run substantially above the May forecast of 4.5% for the year overall. Core inflation is forecast to remain elevated at 4% or higher for a considerable time.

In domestic financial markets, long-term market interest rates have risen considerably, due to expectations about policy rate hikes at home and abroad, while stock prices have fallen sharply driven mainly by concerns about global economic slowdown. The Korean won to US dollar exchange rate has risen significantly, reflecting the global strengthening of the US dollar. Household loans have increased slightly and housing prices have remained steady.

Considering inflation and economic conditions, though economic downside risk is indeed high, uncertainties remain elevated, and thus the Board sees it as important at this time to curb the spread of inflation expectations through a 50-basis-point rate hike to prevent acceleration of inflation. 

The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over a medium-term horizon as it monitors economic growth, while paying attention to financial stability. The Board sees continued rate hikes as warranted, as inflation is expected to run above the target level for a considerable time. In this process the Board will determine the size and pace of further increase of the Base Rate while thoroughly assessing the trends of growth and inflation, the risk of a buildup of financial imbalances, monetary policy changes in major countries, and external economic conditions including geopolitical risks.

Opening Remarks to the Press Conference

The Monetary Policy Board (MPB) of the Bank of Korea decided today to raise the Base Rate by 50 basis points, from 1.75% to 2.25%. First of all, I would like to tell you that the decision was made with a sense of grave responsibility, since this was the first 50-basis-point rate hike in the Bank’s history, although rate cuts of more than 50 basis points had been made before. I will explain the background to the Base Rate hike in detail after touching upon global and domestic financial and economic conditions.

First, looking at the changes in external conditions since the May MPB meeting, global economic growth has weakened and uncertainties as to the growth path have increased significantly, affected by the prolonged Ukraine crisis and the acceleration of policy rate hikes in major countries, while inflation has exceeded 8% in major countries including the US and those in the euro zone. As risk aversion in global financial markets has strengthened accordingly, the US dollar has remained strong and stock prices have fallen considerably while government bond yields in major countries have fluctuated significantly. 

Despite the worsening external conditions, the Korean economy continued to recover until the first half of this year as originally expected. Private consumption has improved led by face-to-face services industries, and sluggishness in facilities investment has partially eased, while export growth has somewhat slowed. However, GDP growth is projected to be below the May forecast, affected by the slowdown in exports owing to weakening of economic growth in major countries. Uncertainties surrounding the economic outlook are also judged to be elevated.

Concerning inflation, consumer price inflation has risen to the 6% level for the first time since the Asian currency crisis in 1998. Inflation has not only risen significantly but is doing so at a faster pace. It took seven months for inflation to reach the 5% level from the 3% level, but it took only one month to rise from the 5% level to the 6% level. Furthermore, as demand-side pressures as well as supply-side factors have grown, inflation is becoming more broad-based, with 50% of the items composing the consumer price index showing price increases of 5% or higher. As a result, core inflation and the inflation expectations of the general public have increased to almost 4%.

In domestic financial markets, volatility of major price variables has heightened greatly. Long-term market interest rates have risen considerably on the prospect of faster policy rate hikes at home and abroad, and stock prices have fallen sharply driven mainly by concerns about the global economic slowdown. The Korean won to US dollar exchange rate has risen to above 1,300 won, reflecting the global strengthening of the US dollar and net outflows of stock investment funds by Korean nationals and foreigners. Looking at financial stability, household loans in the financial sector increased slightly in June, led by housing-related loans, despite declines in unsecured loans, and housing prices remained steady.

Today, the Monetary Policy Board decided to raise the Base Rate by 50 basis points in consideration of the need for a preemptive policy response to ensure price stability. All MPB members supported the decision unanimously. 

As for a more detailed explanation of the background to the Base Rate hike, just as I mentioned earlier, consumer price inflation at the 6% level is already high, and inflation is getting more broad-based, thus causing negative real interest rates to widen significantly. In addition, there have been growing concerns that high inflation could become entrenched as inflation expectations have been spreading with short-term inflation expectations nearing 4% and wage growth accelerating, and the interaction between inflation and wages has strengthened. The Board thus judged that a policy response to this would be of great importance. Although global economic downside risks had increased, the Board judged that, particularly since there are high uncertainties associated with the Ukraine crisis and the pace of policy rate hikes in major economies, it would be desirable to respond to such risks after further examining external developments and their impacts on the domestic economy.

The Bank of Korea sees it warranted to maintain its stance of Base Rate hikes going forward, as inflation is projected to remain high for some time. With regard to the pace of increase, given today’s preemptive 50bp hike, we believe gradual, 25bp increases will be appropriate for some time, unless domestic prices deviate considerably from our current projection that inflation will gradually decline after running high for several months. However, let me make it clear that the timing and size of our policy response is subject to change if inflation accelerates due to shifts in domestic or overseas conditions, or if the economy slows to a larger extent than expected. We will closely monitor how the Korean financial and FX markets are impacted by currency depreciation and capital outflow pressures in EMEs and the consequent changes in international financial market conditions. 

The Board is well aware that today’s 50bp rate hike could aggravate difficulties for the vulnerable sectors of our economy. However, if we fail to make a timely response now, resulting in the strengthening of the interaction between price and wage and the entrenchment of high inflation, a larger rate hike will be unavoidable later, which could weigh more heavily on the vulnerable sectors as well as the economy as a whole. As for the growing hardship faced by the vulnerable sectors, we will work hard to find targeted support measures in cooperation with the government. One such example is our plan to keep the interest rate at 0.25% for the loans provided to firms affected by COVID-19 under the Bank Intermediated Lending Support Facility, for a maximum of one year even after the program expires at the end of September 2022 as scheduled. The Bank of Korea will also work toward improving the household debt structure, by providing support for the conversion of households’ floating-rate loans to fixed-rate ones. 

The Monetary Policy Board of the Bank of Korea decided today to raise the Base Rate by 25 basis points, from 1.50% to 1.75%.

Currently available information suggests that inflationary pressures have remained high, while the recovery of the global economy has moderated affected by the Ukraine crisis and lockdown measures in China. In global financial markets, government bond yields in major countries have risen and the US dollar has strengthened considerably, due to expectations about a faster pace of the US Federal Reserve’s policy normalization. Stock prices have fallen sharply as risk aversion has strengthened. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by global inflation movements, monetary policy changes in major countries, geopolitical risks, and COVID-19 restrictions in major countries.

The Korean economy has continued to recover. Private consumption has improved rapidly supported by the lifting of social distancing restrictions, while facilities investment has continued to slow due to global supply constraints and exports have moderated. Labor market conditions have continued to improve, with the year-on-year increase in the number of persons employed remaining high. Going forward, the economy is likely to sustain its recovery supported by the improvement in private consumption, despite slower export growth owing to moderation in global economic growth. GDP growth this year is projected to be at the upper-2% level, somewhat below the February forecast of 3.0%.

Consumer price inflation has risen significantly to the upper-4% level due to the accelerating increase in the prices of petroleum products and industrial products, the ongoing sharp rise in the prices of personal services, and increases in electricity and gas fees. Core inflation (excluding changes in food and energy prices from the CPI) and the inflation expectations of the general public have increased to the lower-3% level. Looking ahead, it is forecast that consumer price inflation will remain high in the 5% range for some time, and run at the mid-4% level for the year overall, substantially above the February forecast of 3.1%. Core inflation is forecast to rise to the lower-3% level for the year overall. 

In domestic financial markets, the Korean won to US dollar exchange rate has risen significantly and stock prices have fallen while long-term market interest rates have fluctuated considerably, mainly driven by acceleration of the US Federal Reserve’s policy rate hikes as well as concerns over slowing economic growth in China. Household loans have shifted to a slight increase and housing prices have remained steady.

The Board will continue to conduct monetary policy in order to sustain the recovery of economic growth and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability. The Board sees it as warranted to conduct monetary policy with more emphasis on inflation for some time, as the Korean economy is expected to continue its recovery and inflation to run above the target level for a considerable time, despite underlying uncertainties in domestic and external conditions. In this process the Board will judge when to further adjust the degree of accommodation while thoroughly assessing the trends of growth and inflation, the risk of a buildup of financial imbalances, monetary policy changes in major countries, and external economic conditions including geopolitical risks.

The Monetary Policy Board of the Bank of Korea decided today to raise the Base Rate by 25 basis points, from 1.25% to 1.50%.

Currently available information suggests that inflation has accelerated while the recovery of the global economy has somewhat moderated, affected by the Ukraine crisis. In global financial markets, government bond yields in major countries have risen sharply and the US dollar has strengthened, mainly due to changes in expectations about the pace of the US Federal Reserve’s policy normalization. Stock prices have rebounded after a considerable decline. Looking ahead, the Board expects that the global economy will resume its trend of recovery, supported by the easing of COVID-19 restrictions in major countries, but sees it as likely to be affected largely by COVID-19 developments, global inflation movements, monetary policy changes in major countries and geopolitical risks.

The Korean economy has continued to recover. Exports have sustained their buoyancy while facilities investment has slowed due to global supply constraints. Private consumption has recently shown modest improvement thanks to the easing of domestic COVID-19 restrictions, after having moderated. Labor market conditions have continued to improve, with the year-on-year increase in the number of persons employed remaining high. Going forward, the economy is likely to sustain its recovery albeit partly affected by the Ukraine crisis, as exports are expected to continue their solid trend of growth while private consumption is likely to improve. GDP growth this year is projected to be somewhat below the February forecast of 3%.

Consumer price inflation has risen significantly to the lower-4% level due to soaring prices of petroleum products as well as the accelerating increase in the prices of industrial products and personal services. Core inflation (excluding changes in food and energy prices from the CPI) and the inflation expectations of the general public have increased to the upper-2% level. Looking ahead, it is forecast that consumer price inflation will remain high in the 4% range for some time, and run substantially above the February forecast of 3.1% for the year overall. Core inflation is forecast to remain around 3% for a considerable time. 

In domestic financial markets, long-term market interest rates and the Korean won to US dollar exchange rate have risen significantly while stock prices have fluctuated considerably, mainly driven by global financial market movements. Household loans have decreased slightly and housing prices have fallen slightly, especially in the Seoul metropolitan area.

The Board will continue to conduct monetary policy in order to sustain the recovery of economic growth and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability. The Board will appropriately adjust the degree of monetary policy accommodation as the Korean economy is expected to continue its recovery and inflation to run above the target level for a considerable time, despite underlying uncertainties in domestic and external conditions. In this process the Board will judge when to further adjust the degree of accommodation while thoroughly assessing developments related to COVID-19, the risk of a buildup of financial imbalances, monetary policy changes in major countries, geopolitical risks, and the trends of growth and inflation.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.25% for the intermeeting period.

Currently available information suggests that the global economy has continued to recover despite the spread of coronavirus variants, as economic activity has not contracted significantly, supported by accelerated vaccinations. Volatility in global financial markets has increased, affected by concerns over the pace of the US Federal Reserve’s policy rate hikes as well as the Ukraine crisis. Government bond yields in major countries have risen sharply and stock prices have fallen considerably. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by COVID-19 developments, global inflation movements, monetary policy changes in major countries and geopolitical risks.

The Korean economy has continued to recover despite the resurgence of COVID-19. Although the improvement in private consumption has moderated owing to the tightening of domestic COVID-19 restrictions, exports have sustained their buoyancy thanks to robust global demand. Facilities investment has somewhat slowed due to global supply constraints. Labor market conditions have continued to improve, with a sustained trend of increase in the number of persons employed. Going forward, the economy is likely to sustain its sound growth, as the recovery of private consumption is forecast to gradually pick up again while exports are expected to continue their solid trend of increase. GDP growth this year is projected to be around 3%, not deviating greatly from the November forecast.

Consumer price inflation has remained high in the mid- to upper-3% range due to the ongoing sharp rise in the prices of petroleum products, as well as the accelerating increase in the prices of personal services and industrial products. Core inflation (excluding changes in food and energy prices from the CPI) has risen to the mid-2% level. The inflation expectations of the general public have run at the mid- to upper-2% level. Looking ahead, it is forecast that consumer price inflation will run substantially above 3% for a considerable time, exceeding the path projected in November, and run at the lower-3% level for the year overall. Core inflation is forecast to rise to the mid-2% level this year.

In domestic financial markets, long-term market interest rates have risen significantly and stock prices have fallen considerably while the Korean won to US dollar exchange rate has increased slightly, mainly driven by global financial market movements. The amount of increase in household loans has lessened, and the increase in housing prices has moderated in all parts of the country.

The Board will continue to conduct monetary policy in order to sustain the recovery of economic growth and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability. The Board will appropriately adjust the degree of monetary policy accommodation as the Korean economy is expected to continue its sound growth and inflation to run above the target level for a considerable time, despite underlying uncertainties over the virus. In this process the Board will judge when to further adjust the degree of accommodation while thoroughly assessing developments related to COVID-19, the risk of a buildup of financial imbalances, the effects of the Base Rate raises, monetary policy changes in major countries, and the trends of growth and inflation.

The Monetary Policy Board of the Bank of Korea decided today to raise the Base Rate by 25 basis points, from 1.00% to 1.25%.

Currently available information suggests that the global economy has continued to recover despite the spread of a new coronavirus variant, as economic activity has not contracted significantly, supported by accelerated vaccinations. In global financial markets, government bond yields and stock prices in major countries have rebounded after having declined, affected by developments related to COVID-19 and changes in expectations about monetary policy in major countries. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by COVID-19 developments and the status of vaccine distribution, as well as by global inflation movements and monetary policy changes in major countries.

The Korean economy has continued to recover despite the resurgence of COVID-19. Although the improvement in private consumption has moderated owing to the tightening of domestic COVID-19 restrictions, exports have sustained their buoyancy thanks to robust global demand. Facilities investment has somewhat slowed due to global supply constraints. Labor market conditions have continued to improve, with a sustained trend of increase in the number of persons employed. Going forward, the economy is likely to sustain its sound growth, as the recovery of private consumption is forecast to pick up again while exports are expected to continue their solid trend of increase. GDP growth this year is projected to be around 3%, consistent with the forecast in November.

Consumer price inflation has risen to the upper-3% level due to the ongoing sharp rise in the prices of petroleum products and agricultural, livestock, and fisheries products, as well as the accelerating increase in the prices of non-petroleum industrial products and personal services. Core inflation (excluding changes in food and energy prices from the CPI) has run at the lower-2% level and the inflation expectations of the general public have run at the mid- to upper-2% level. Looking ahead, it is forecast that consumer price inflation will continue to run in the 3% range for a considerable time, exceeding the path projected in November, and above the mid-2% level for the year overall. Core inflation is forecast to run considerably above 2% this year.

In domestic financial markets, long-term market interest rates fell due to concerns over the resurgence of COVID-19 but have rebounded affected by the rise in US Treasury yields. The Korean won to US dollar exchange rate rose considerably, due mainly to the prospect of accelerating monetary policy normalization by the US Federal Reserve, but then decreased. Stock prices have fallen slightly. The amount of increase in household loans has lessened, and the increase in housing prices has somewhat moderated in all parts of the country.

The Board will continue to conduct monetary policy in order to sustain the recovery of economic growth and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability. The Board will appropriately adjust the degree of monetary policy accommodation as the Korean economy is expected to continue its sound growth and inflation to run above the target level for a considerable time, despite underlying uncertainties over the virus. In this process the Board will judge when to further adjust the degree of accommodation while thoroughly assessing developments related to COVID-19, changes in the pace of growth and inflation, the risk of a buildup of financial imbalances, the effects of the Base Rate raises, and monetary policy changes in major countries.

The Monetary Policy Board of the Bank of Korea decided today to raise the Base Rate by 25 basis points, from 0.75% to 1.00%.

Currently available information suggests that the global economy has continued to recover despite the spread of COVID-19 variants, supported by accelerated vaccinations and the relaxation of restrictions on economic activity in major countries. In global financial markets, the volatility of government bond yields has increased and the US dollar has strengthened, affected by concerns over the prospect of prolonged global inflation and changes in expectations about monetary policy in major countries. Stock prices, especially in advanced economies, have risen, mainly driven by favorable corporate performances. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the severity of the resurgence of COVID-19 and the status of vaccine distribution, as well as by global inflation movements and monetary policy changes in major countries.

The Korean economy has continued its sound recovery. Although facilities investment has somewhat slowed due to global supply constraints, exports have sustained their buoyancy and private consumption has shown rapid improvement supported by accelerated vaccinations and the easing of domestic COVID-19 restrictions. Labor market conditions have continued to improve, with a sustained year-on-year increase in the number of persons employed. Going forward, the improvement of private consumption is likely to strengthen, while exports and investment are expected to sustain favorable movements. GDP growth is projected to be around 4% in 2021 and around 3% in 2022, consistent with the forecast in August.

Consumer price inflation has risen to the lower-3% level due to the accelerating increase in the prices of petroleum products and the base effect from the decline in the prices of public services last year. Core inflation (excluding changes in food and energy prices from the CPI) has risen to the mid-2% level. The inflation expectations of the general public have increased to the upper-2% level. Looking ahead, it is forecast that consumer price inflation will run considerably above 2%, exceeding the path projected in August, and then decline gradually, running at around 2% for 2022 as a whole. Core inflation is forecast to increase to the upper-1% level.

In domestic financial markets, the Korean Treasury bond yield has increased, especially the 3-year yield, due to heightened expectations for monetary policy normalization at home and abroad. Stock prices have risen slightly, affected by stock price movements in major countries, and the Korean won to US dollar exchange rate has fallen. The amount of increase in household loans has lessened somewhat, and housing prices have continued to increase rapidly in all parts of the country.

The Board will continue to conduct monetary policy in order to sustain the recovery of economic growth and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability. The Board will appropriately adjust the degree of monetary policy accommodation as the Korean economy is expected to continue its sound growth and inflation to run above the target level for a considerable time, despite underlying uncertainties over the virus. In this process the Board will judge when to further adjust the degree of accommodation while thoroughly assessing developments related to COVID-19, changes in the pace of growth and inflation, the risk of a buildup of financial imbalances, and monetary policy changes in major countries.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 0.75% for the intermeeting period.

Currently available information suggests that the global economy has continued to recover despite the spread of COVID-19 variants, supported by accelerated vaccinations and the relaxation of restrictions on economic activity in major countries. In global financial markets, government bond yields in major countries have increased steeply and the US dollar has strengthened while stock prices have fallen, amid growing concerns over the prospect of prolonged global inflation and the rising possibility of the US Federal Reserve’s tapering within the year. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the severity of the resurgence of COVID-19 and the status of vaccine distribution, as well as by global inflation movements and monetary policy changes in major countries.

The Korean economy has continued its sound recovery. Exports have sustained their buoyancy and facilities investment has continued its robust trend. Private consumption has recently shown improvement again, after having slowed due to the coronavirus resurgence. Labor market conditions have continued to improve, with a sustained year-on-year increase in the number of persons employed. Going forward, the economy is likely to continue its recovery as private consumption is forecast to improve gradually, affected by vaccinations and the consequent expansion of economic activity as well as the execution of a supplementary budget, while exports and investment are expected to sustain their buoyancy. GDP growth this year is projected to be around 4%, consistent with the forecast in August.

Consumer price inflation has remained high at the mid-2% level due to the accelerating increase in the prices of petroleum products and of services. Core inflation (excluding changes in food and energy prices from the CPI) has risen to the mid-1% level. The inflation expectations of the general public have remained at the mid-2% level. Looking ahead, it is forecast that consumer price inflation will run at the mid-2% level for some time, exceeding the path projected in August, before declining somewhat. Core inflation is forecast to increase to around the upper-1% level.

In domestic financial markets, long-term market interest rates and the Korean won to US dollar exchange rate have risen significantly while stock prices have fallen considerably, mainly driven by global financial market movements. The increase in household loans remains at a high level, and housing prices have continued to increase rapidly in all parts of the country.

The Board will continue to conduct monetary policy in order to sustain the recovery of economic growth and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability. The Board will appropriately adjust the degree of monetary policy accommodation as the Korean economy is expected to continue its sound growth and inflation to run above 2% for some time, despite ongoing uncertainties over the virus. In this process the Board will judge when to further adjust the degree of accommodation while thoroughly assessing developments related to COVID-19, changes in the pace of growth and inflation, the risk of a buildup of financial imbalances, and monetary policy changes in major countries.

The Monetary Policy Board of the Bank of Korea decided today to raise the Base Rate by 25 basis points, from 0.50% to 0.75%.

Currently available information suggests that the global economy has continued to recover, supported by accelerated vaccinations and the relaxation of restrictions on economic activity in major countries. In global financial markets, government bond yields in major countries have declined affected by the resurgence of COVID-19. The US dollar has strengthened and stock prices in emerging economies have fallen, due mainly to the possibility that the US Federal Reserve would start tapering its asset purchases within the year. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the severity of the resurgence of COVID-19 and the status of vaccine distribution, as well as by monetary policy changes in major countries and their effects.

The Korean economy has continued its sound recovery. Although private consumption has somewhat slowed due to the coronavirus resurgence, exports have sustained their buoyancy and facilities investment has shown a robust trend. Labor market conditions have continued to improve, with a sustained year-on-year increase in the number of persons employed. Going forward, the economy is likely to continue its recovery as private consumption is forecast to improve gradually, affected by the expansion of vaccinations and the execution of a supplementary budget, while exports and investment are expected to sustain their buoyancy. GDP growth this year is projected to be around 4%, consistent with the forecast in May.

Consumer price inflation has remained high at the mid-2% level due to the rising prices of petroleum products and agricultural, livestock, and fisheries products as well as the accelerating increase in service prices. Core inflation (excluding changes in food and energy prices from the CPI) has run at the lower-1% level. The inflation expectations of the general public have risen to the mid-2% level. It is forecast that consumer price inflation will increase to the lower-2% level this year, exceeding the May forecast of 1.8%. Core inflation is forecast to run at the lower-1% level.

In domestic financial markets, stock prices have fallen and the Korean won to US dollar exchange rate has risen considerably, mainly driven by global financial market movements and the domestic resurgence of COVID-19. The Korean Treasury bond yield, in particular the long-term bond yield, has declined. Household loan growth has accelerated and housing prices have continued to increase rapidly in all parts of the country.

The Board will continue to conduct monetary policy in order to sustain the recovery of economic growth and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability. The Board will gradually adjust the degree of monetary policy accommodation as the Korean economy is expected to continue its sound growth and inflation to run above 2% for some time, despite ongoing uncertainties over the virus. In this process the Board will judge when to further adjust the degree of accommodation while thoroughly assessing developments related to COVID-19, changes in the pace of growth and inflation, the risk of a buildup of financial imbalances, and monetary policy changes in major countries.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 0.50% for the intermeeting period.

Currently available information suggests that the recovery of the global economy has strengthened, supported by accelerated vaccinations and the relaxation of restrictions on economic activity in major countries. In global financial markets, stock prices have continued to rise, reflecting the economic recovery. The US dollar has strengthened, while long-term government bond yields have declined considerably due mainly to the spread of COVID-19 variants. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the severity of the resurgence of COVID-19 and the status of vaccine distribution, as well as by national policy responses and their effects.

The Korean economy has continued its sound recovery. Exports and facilities investment have sustained their buoyancy and private consumption has shown improvement. Labor market conditions have continued to improve, with the year-on-year increase in the number of persons employed remaining high. Going forward, exports and investment will sustain their buoyancy, while private consumption is forecast to temporarily weaken affected by the coronavirus resurgence but then return to the path of recovery supported by the execution of a supplementary budget. GDP growth this year is projected to be around 4%, consistent with the forecast in May.

Consumer price inflation has remained high at the mid-2% level due to the rising prices of petroleum products and agricultural, livestock, and fisheries products as well as the accelerating increase in service prices. Core inflation (excluding changes in food and energy prices from the CPI) has run at the lower-1% level. The inflation expectations of the general public have risen slightly to the lower-to mid-2% range. Looking ahead, it is forecast that consumer price inflation will continue to run in the lower- to mid-2% range for some time, exceeding the path projected in May. Core inflation is forecast to increase gradually to the mid-1% range.

In domestic financial markets, stock prices and the Korean won to US dollar exchange rate have risen, mainly driven by global financial market movements. The 3-year Korean Treasury bond yield has risen considerably, while the 10-year yield has fallen. Household loan growth has remained high, showing a record level on a first-half basis, and housing prices have continued to increase rapidly in all parts of the country.

The Board will continue to conduct monetary policy in order to sustain the recovery of economic growth and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability. The Board will maintain an accommodative stance of monetary policy as there remain uncertainties posed by the virus, although the Korean economy is expected to continue its recovery and inflation to remain at a high level for some time. In this process the Board will judge whether it is appropriate to adjust the degree of accommodation while thoroughly assessing developments related to COVID-19, changes in the pace of growth and inflation, and the risk of a buildup of financial imbalances.

Currently available information suggests that the recovery of the global economy has strengthened, supported by the economic stimulus in major countries, accelerated vaccinations, and the relaxation of restrictions on economic activity. In global financial markets, the rise in stock prices in major countries has moderated as risk-taking tendencies were offset by factors such as inflation concerns. Government bond yields have fluctuated within a relatively narrow range. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the severity of the resurgence of COVID-19 and the status of vaccine distribution, as well as by national policy responses and their effects.

The recovery of the Korean economy has strengthened. Exports have sustained their buoyancy and facilities investment has continued to recover robustly, while private consumption has gradually emerged from its slump. Labor market conditions have continued to improve, with the year-on-year increase in the number of persons employed having risen. Going forward, the recovery of the Korean economy is likely to strengthen thanks to the buoyancy of exports and investment as well as the improvement in private consumption. GDP growth this year is projected to be around 4%, significantly above the February forecast of 3.0%.

Consumer price inflation has risen markedly to the lower-2% level due to the rising prices of petroleum products and agricultural, livestock, and fisheries products as well as the accelerating increase in service prices. Core inflation (excluding changes in food and energy prices from the CPI) has moved up considerably to the lower-1% level. The inflation expectations of the general public have risen slightly within the lower-2% range. It is forecast that consumer price inflation will run at the upper-1% range this year, considerably exceeding the February forecast of 1.3%. Core inflation is forecast to run at the lower-1% range.

In domestic financial markets, long-term market interest rates have risen, affected mainly by strengthened economic recoveries at home and abroad. Stock prices continued to increase before declining moderately due to global financial market movements. The Korean won to US dollar exchange rate has fluctuated slightly. Household loan growth has remained high, and housing prices have continued to increase rapidly in all parts of the country.

The Board will continue to conduct monetary policy in order to support the economy and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability. While the Korean economic recovery is expected to strengthen and inflation to remain at a high level for some time, there are underlying uncertainties surrounding the path of COVID-19 and inflationary pressures on the demand side are forecast to be modest. Thus, the Board will maintain its accommodative monetary policy stance. In this process the Board will assess developments related to COVID-19 and economic developments in major countries, while paying closer attention to the buildup of financial imbalances such as fund flows concentrated in asset markets and household debt growth.

Currently available information suggests that the recovery of the global economy has strengthened, supported by the economic stimulus in major countries and the expansion of vaccinations. In global financial markets, stock prices and government bond yields in major countries have increased, driven mainly by higher expectations for economic recovery. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the severity of the resurgence of COVID-19 and the status of vaccine distribution, as well as by national policy responses and their effects.

The recovery of the Korean economy has strengthened somewhat. Exports have sustained their buoyancy and facilities investment has continued to recover robustly, while the sluggishness in private consumption has eased. Labor market conditions have showed some signs of improvement, with the number of persons employed shifting to an increase compared to the corresponding period last year. Going forward, the economy is likely to continue its recovery, led by exports and investment. However, uncertainties surrounding the pace of recovery are judged to remain elevated. GDP growth this year is projected to be above the February forecast of 3.0%.

Consumer price inflation has risen to the mid-1% level due to an increase in petroleum product prices as well as rising prices of agricultural, livestock, and fisheries products. Core inflation (excluding changes in food and energy prices from the CPI) has moved up slightly within the mid-0% range. The inflation expectations of the general public have picked up to the lower-2% level. Looking ahead, it is forecast that consumer price inflation will run above the path projected in February and fluctuate for some time at around 2%, before declining slightly. Core inflation is forecast to increase gradually to the 1% range.

In domestic financial markets, long-term market interest rates and stock prices have risen, affected by global financial market movements and improvement of economic indicators. The Korean won to US dollar exchange rate rose slightly, largely reflecting the strengthening of the US dollar. Household loan growth has remained high, and housing prices have continued to increase rapidly in all parts of the country.

The Board will continue to conduct monetary policy in order to support the economy and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability. While the Korean economic recovery is expected to strengthen gradually, there is still a high level of uncertainty surrounding the path of COVID-19 and inflationary pressures on the demand side are forecast to be modest. Thus, the Board will maintain its accommodative stance of monetary policy. In this process the Board will thoroughly assess developments related to COVID-19 as well as the effects of the policy measures taken in response to the pandemic, while paying attention to changes in financial stability conditions such as fund flows to asset markets and household debt growth.

Currently available information suggests that the recovery of the global economy has remained slow due to the ongoing influence of the movement restrictions following the resurgence of COVID-19. In global financial markets, stock prices and government bond yields in major countries have increased, mainly driven by the expectations for economic recovery following the expansion of vaccinations and the prospect of a further fiscal stimulus package by the new US administration. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the severity of the resurgence of COVID-19 and the status of vaccine distribution, as well as by national policy responses and their effects.

The Korean economy has continued to recover modestly. Although private consumption has remained weak as social distancing has been prolonged, exports have sustained their buoyancy led by the IT sector and facilities investment has continued to recover. Labor market conditions have remained weak, as the number of persons employed declined sharply compared to the corresponding period last year. Going forward, the economy is likely to continue its recovery, led by exports and investment. However, uncertainties surrounding the pace of recovery are judged to remain elevated. GDP growth this year is projected to be around 3.0%, generally consistent with the November forecast.

Consumer price inflation has remained at the mid-0% level as the surging prices of agricultural, livestock, and fisheries products were offset by factors such as the decreasing prices of public services. Core inflation (excluding changes in food and energy prices from the CPI) has also remained at the mid-0% level. The inflation expectations of the general public have risen to 2%. It is forecast that consumer price inflation will run at the low- to mid-1% level this year, exceeding the November forecast of 1.0%, largely reflecting the increase in global oil prices and gradual improvement in economic activity. Core inflation is forecast to run at around 1%.

In domestic financial markets, long-term market interest rates and the Korean won to US dollar exchange rate have risen, mainly driven by global financial market movements. Stock prices have fluctuated considerably, affected by both expectations for economic recovery and caution about the recent rally. Household loan growth has accelerated, and housing prices have continued to increase rapidly in all parts of the country.

The Board will continue to conduct monetary policy in order to support the economy and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability. As the recovery in the Korean economy is expected to be modest and inflationary pressures on the demand side are forecast to remain weak, the Board will maintain its accommodative monetary policy stance. In this process the Board will thoroughly assess developments related to COVID-19 as well as the effects of the policy measures taken in response to the pandemic, while paying attention to changes in financial stability conditions such as fund flows to asset markets and household debt growth.

Currently available information suggests that the recovery of the global economy has weakened due to the resurgence of COVID-19. In global financial markets, despite the coronavirus resurgence, stock prices and government bond yields in major countries have increased steeply and the US dollar has remained weak, due to the rollout of coronavirus vaccines and the consequent hopes for economic recovery. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the severity of the resurgence of COVID-19 and the status of vaccine distribution, as well as by national policy responses and their effects.

The Korean economy has continued to recover modestly. Although private consumption has contracted due to the recent coronavirus resurgence, facilities investment has continued to recover and export growth has increased, led by the IT sector. Labor market conditions have remained weak, with the number of persons employed continuing to decline sharply compared to the corresponding period last year. Going forward, the economy is likely to recover gradually, led by exports and investment. However, uncertainties surrounding the economic outlook are judged to remain elevated. GDP growth this year is projected to be around 3.0%, generally consistent with the November forecast.

Consumer price inflation and core inflation (excluding changes in food and energy prices from the CPI) have remained low at the mid-0% level, reflecting prolonged effects from the decline in the prices of petroleum products and public services compared to the corresponding period last year. The inflation expectations of the general public have remained at the upper-1% level. It is forecast that consumer price inflation will run at the mid- to upper-0% level for some time and then moderately increase to around 1%. Core inflation is forecast to remain at the low- to mid-0% level.

In domestic financial markets, stock prices have surged as the rise in stock prices in major countries and optimistic prospects for the performance of domestic corporations have heightened investors’ risk appetite. Long-term market interest rates have increased, while the Korean won to US dollar exchange rate has fallen. Household loan growth has remained high and housing prices have accelerated in all parts of the country.

The Board will continue to conduct monetary policy in order to support the economy and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability. As the recovery in the Korean economy is expected to be modest and inflationary pressures on the demand side are forecast to remain weak, the Board will maintain its accommodative monetary policy stance. In this process the Board will thoroughly assess developments related to COVID-19 as well as the effects of the policy measures taken in response to the pandemic, while paying attention to changes in financial stability conditions such as fund flows to asset markets and household debt growth.

Currently available information suggests that the global economy has continued to recover, but the pace of recovery has been slow due to the ongoing resurgence of COVID19. In global financial markets, risk aversion has subsided on improvement of economic indicators and hopes for coronavirus vaccine development. Stock prices in major countries and government bond yields have risen and the US dollar has weakened. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the severity of the resurgence of COVID-19 and the status of vaccine development, as well as by national policy responses and their effects. 

The Korean economy has continued to recover at a modest pace. Although the recovery in private consumption has been slow and the correction in construction investment has continued, facilities investment has started to recover and the improvement in exports has continued. Labor market conditions have remained weak, with the number of persons employed continuing to decline sharply compared to the corresponding period last year. Going forward, the economy is likely to recover gradually, led mainly by exports and investment. However, uncertainties surrounding the economic outlook are judged to remain elevated. GDP is projected to grow at slightly below -1% in 2020 and around 3% in 2021. 

Consumer price inflation has slowed to the lower-0% level due to the sharp decline in the prices of public services. Core inflation (excluding changes in food and energy prices from the CPI) recorded a negative rate, and the inflation expectations of the general public have moved down slightly within the upper-1% range. It is forecast that consumer price inflation and core inflation will run at the low- to mid-0% level for some time and then moderately increase to around 1% in 2021. 

In domestic financial markets, stock prices have risen considerably and the Korean won to US dollar exchange rate has fallen significantly while long-term market interest rates have risen, affected by various factors such as global financial market movements and improvement of economic indicators. Household loan growth has picked up and housing prices have continued to increase in all parts of the country. 

The Board will continue to conduct monetary policy in order to support the economy and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability. As the recovery in the Korean economy is expected to be modest and inflationary pressures on the demand side are forecast to remain weak, the Board will maintain its accommodative monetary policy stance. In this process it will thoroughly assess developments related to the pandemic, the impact on the economy and financial markets here and abroad, changes in financial stability such as household debt growth, and the effects of the policy measures taken in response to the pandemic.

Currently available information suggests that the global economy has continued to recover from its earlier sluggishness, but the pace of recovery has slowed due to a resurgence of COVID-19 and measures taken to contain it. In global financial markets, major asset price variables including stock prices and bond yields have fluctuated considerably, due to concerns about a resurgence of the coronavirus and changes in expectations about economic stimulus in major countries. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the evolution of the pandemic, as well as by the effects of national policy responses. 

The Korean economy has continued to recover, albeit at a slow pace. Although the slump in exports has eased, gains in private consumption have been tepid as the number of newly confirmed cases increased again. The recovery in facilities investment has been subdued, and the correction in construction investment has continued. Labor market conditions have remained weak, with the number of persons employed continuing to decline sharply compared to the corresponding period last year. Going forward, the economy is likely to recover gradually, led mainly by exports. However, uncertainties surrounding the economic outlook are judged to remain elevated. GDP growth is projected to be generally consistent with the August forecast of -1.3%.  

Consumer price inflation has risen to around 1%, driven mainly by a large increase in the prices of agricultural, livestock and fisheries products due to severe weather conditions. Core inflation (excluding changes in food and energy prices from the CPI) has also increased slightly within the mid-0% range, and the inflation expectations of the general public have risen to near 2%. It is forecast that consumer price inflation and core inflation will run at the low- to mid-0% level for some time, reflecting various effects such as the drop in global oil prices and weak demand-side inflationary pressures. 

In domestic financial markets, the Korean won to US dollar exchange rate has fallen sharply, while long-term market interest rates and stock prices have fluctuated considerably, affected by various factors such as global financial market movements. Household loan growth has picked up and housing prices have continued to increase at high rates in all parts of the country.  

The Board will continue to conduct monetary policy in order to support the economy and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability. As the recovery in the Korean economy is expected to be slow and inflationary pressures on the demand-side are forecast to remain weak due to the COVID-19 pandemic, the Board will maintain its accommodative monetary policy stance. In this process it will thoroughly assess the severity of the resurgence of COVID19, the impact on the economy and financial markets here and abroad, changes in financial stability, and the effects of the policy measures taken in response to the pandemic. 

Currently available information suggests that the global economy has continued to rebound from the severe contraction, but the pace of recovery has somewhat slowed due to the ongoing spread of the coronavirus (COVID-19). In global financial markets, stock prices in major countries have risen amid continuing hopes for economic recovery, while the US dollar has weakened and government bond yields have moved up slightly. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the evolution of the pandemic, as well as by the effects of national policy responses. 

Economic growth in Korea has remained sluggish. Although the decline in exports has moderated a bit, the improvement in private consumption has weakened. The recovery in facilities investment has been subdued, and the correction in construction investment has continued. Labor market conditions have remained weak, with the number of persons employed continuing to decline sharply. Looking forward, the recovery of domestic economic growth is likely to be slower than previously forecast, largely due to the domestic resurgence of COVID-19. In the Board’s central projection, GDP growth falls to slightly below -1% this year, considerably lower than the May forecast of -0.2%. Uncertainties around the future path of GDP growth are also judged to be very high. 

Consumer price inflation has risen to the lower-0% level, due to a larger increase in the prices of agricultural, livestock, and fisheries products and to a reduced decline in petroleum product prices. Core inflation (excluding changes in food and energy prices from the CPI) has also increased to the mid-0% level, and the inflation expectations of the general public have risen to the upper-1% range. It is forecast that consumer price inflation and core inflation will run at the mid-0% level this year, reflecting prolonged effects from the drop in global oil prices and weak demand-side inflationary pressures. 

Domestic financial markets have been generally stable owing to decreased volatility in global financial markets. The Korean won to US dollar exchange rate has fallen, while long-term market interest rates have fluctuated within a narrow range. Stock prices rose sharply but then reversed some of the earlier gains, mainly due to concerns about the coronavirus resurgence since mid-August. The rate of household loan growth has risen, and housing prices have continued to increase in all parts of the country. 

The Board will continue to conduct monetary policy in order to support the economy and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability. As economic growth is expected to be sluggish and inflationary pressures on the demand side are forecast to remain weak due to the COVID19 pandemic, the Board will maintain its accommodative monetary policy stance. In this process it will thoroughly assess the severity of the coronavirus resurgence and its impact on the economy and financial markets, changes in financial stability, and the effects of the policy measures taken in response to the pandemic. 

Currently available information suggests that the global economy has started to rebound moderately from the sharp contraction, as economic activity gradually resumes despite the ongoing spread of COVID-19. In global financial markets, risk aversion has subsided on hopes of economic recovery. Stock prices in major countries have risen and the US dollar has weakened, while government bond yields have fluctuated slightly. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the evolution of the pandemic, as well as by the effects of national policy responses. 

Economic growth in Korea has remained sluggish. Although consumption has rebounded with the relaxation of some pandemic-related restrictions on economic activity and the government’s stimulus package, exports have continued to decline. While the recovery in facilities investment has been subdued, the correction in construction investment has continued. Labor market conditions have remained weak, with the number of persons employed continuing to decline sharply. Looking forward, facilities and construction investment are expected to grow at a moderate pace; however, the paces of recovery in consumption and exports will be slower than previously forecast. Accordingly, GDP growth this year is likely to be lower than the May forecast of -0.2%. 

Consumer price inflation recorded around 0%, held down by declining prices of petroleum products and public services. Core inflation (excluding changes in food and energy prices from the CPI) has also remained at the lower-0% range, and the inflation expectations of the general public have stayed at the mid-1% level. It is forecast that consumer price inflation and core inflation will run at the lower-0% level this year, reflecting prolonged effects from the drop in global oil prices and weak demand-side inflationary pressures. 

Domestic financial markets have been generally stable owing to decreased volatility in global financial markets. Stock prices have risen and the Korean won to US dollar exchange rate has fallen considerably, while long-term market interest rates have fluctuated within a narrow range. The increase in household loans has expanded materially, and housing prices have generally accelerated in all parts of the country. 

The Board will continue to conduct monetary policy in order to support the economy and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability. As economic growth is expected to be sluggish and inflationary pressures on the demand-side are forecast to remain weak due to the COVID19 pandemic, the Board will maintain its accommodative monetary policy stance. In this process it will thoroughly assess developments related to the pandemic, the impact on the economy and financial markets here and abroad, changes in financial stability, and the effects of the policy measures taken in response to the pandemic. 

In a related set of actions, the Board has decided to lower the interest rate on the Bank Intermediated Lending Support Facility from 0.50-0.75% to 0.25%, effective March 17, 2020. 

To manage liquidity in the financial market at a sufficient level, the Board will also broaden the eligible collateral for open market operations to include debentures issued by banking institutions. 

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.75% for the intermeeting period

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.25% for the intermeeting period.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.25% for the intermeeting period.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.25% for the intermeeting period.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.25% for the intermeeting period.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.25% for the intermeeting period.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.25% for the intermeeting period.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.25% for the intermeeting period.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.25% for the intermeeting period.

The Monetary Policy Board of the Bank of Korea decided today to lower the Base Rate by 25 basis points from 1.50% to 1.25%.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.50% for the intermeeting period.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.50% for the intermeeting period.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.50% for the intermeeting period.

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.50% for the intermeeting period.