Bank of Korea(BOK) Governor Rhee Chang-yong says the central bank will have to follow the lead of the U.S. Federal Reserve in prioritizing price stability should inflation persist at well above five percent.
Rhee made the remarks in an interview with Bloomberg TV on Sunday while attending an annual gathering of central bankers in Jackson Hole, Wyoming.
When asked whether he would consider a 50-basis-point rate hike, the BOK chief said he did not want to make a definitive statement, adding that uncertainties required that decisions be made based on data.
Earlier this month, the BOK raised the key rate by a quarter-percentage point from two-point-25 to two-point-five percent, after which Rhee signaled the central bank intended to maintain a steady 25-basis-point-hike policy.
Speaking at the central bankers’ meeting, U.S. Fed chair Jerome Powell reaffirmed a commitment to higher rates until there is a substantial reduction in inflation. Rhee noted that higher U.S. rates may further weaken the Korean won, leading to stronger inflation at home.
While acknowledging that a significant difference in interest rates is not ideal, the governor said South Korea must focus on its inflation rate “through the indirect impact of exchange rate depreciation.”
Source: KBS World Radio