Bank of Korea board members cautious on easing monetary policy, minutes show

MOST Bank of Korea board members said the central bank needed to be cautious about easing monetary policy at their rate decision meeting on May 23, as there remained uncertainty over price pressures, minutes showed on Tuesday (Jun 11).

“The inflation aspect requirements for easing monetary tightening appear to be gradually being fulfilled,” one board member said. “However, it is difficult to rule out the possibility of stronger upward pressures on inflation.”

“It is desirable to further monitor economic developments before deciding whether to ease monetary tightening,” the member said.

South Korea’s central bank last month held interest rates at a 15-year high of 3.5 per cent and struck a balanced policy tone, as it reiterated risks around inflationary pressures in the wake of stronger-than-expected economic growth.

In May, South Korea’s consumer inflation slowed for a second straight month to a 10-month low of 2.7 per cent, but it was still higher than the central bank’s medium-term target of 2 per cent.

Another member said: “After experiencing high levels of inflation, anchoring inflation expectations is more important than ever.”

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Board members cited inflationary pressures from stronger economic growth, monetary policy changes in major countries, and the accumulated impact from high interest rates, as major factors to monitor for future policy decisions, according to the minutes.

At the meeting in May, five board members saw the policy interest rate staying at 3.5 per cent for the next three months, while one said it was desirable to keep the door open for a rate cut. REUTERS