Bank of Korea governor says interest rates to be raised ‘on time’
The skyline of central Seoul is seen during a foggy day in Seoul March 4, 2015. South Korea’s central bank cut interest rates for the first time in five months on Thursday in a surprise move, joining the ranks of other economies which have recently taken advantage of lower inflation to ease monetary policy to spur sluggish growth. Picture taken on March 4, 2015. REUTERS/Kim Hong-Ji (SOUTH KOREA – Tags: ENVIRONMENT CITYSCAPE BUSINESS)
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SEOUL, June 12 : South Korea’s central bank governor said on Friday it was necessary to raise interest rates “on time” as inflation was expected to exceed the target for a considerable period of time amid high oil prices triggered by the Middle East conflict.
“Monetary policy often faces trade-offs between policy variables, but such trade-offs are not huge at this time. Therefore, it is necessary to raise interest rates on time with a focus on price stability,” Bank of Korea Governor Shin Hyun-song said.
Shin said data released after the last policy meeting in May also confirmed that monetary policy conditions point to one clear direction.
South Korea’s consumer inflation quickened in May to a more than two-year high of 3.1 per cent, data showed last week, exceeding market expectations and supporting the case for monetary tightening as early as next month.
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Inflation is expected to exceed the target level for a considerable period of time, Shin said. The BOK targets inflation at 2 per cent in the medium term.
Last month, the BOK kept its benchmark interest rate unchanged, while a hawkish split within its seven-member board signalled an imminent turn toward a more restrictive policy stance to curb inflation and support a slumping won.
The bank next meets on July 16.
Source: Reuters
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