Bank of Korea Signals Rate Hike as Inflation Stays Above Target

Bank of Korea Governor Shin Hyun Song told parliament that the country's benchmark interest rate will need to rise at an appropriate time, reinforcing the central bank's hawkish stance just ahead of a closely watched rate decision. Speaking to the National Assembly's Planning and Finance Committee, Shin said it was necessary to raise the benchmark rate given that inflation remains above the central bank's target, economic growth is improving and financial-stability risks are rising. The comments strengthen market expectations for a hike at the bank's upcoming meeting, after it has held the policy rate at 2.5% for several consecutive meetings even while formally in an easing cycle. Inflation has picked up in recent months, running above the 2% target, driven in part by higher oil prices linked to the Middle East conflict and a weaker won, while housing prices and household borrowing have added to financial-stability concerns. Analysts expect the central bank to prioritise price stability and currency defence over supporting growth, and some forecast further increases later in the year that could push the policy rate toward 3%. The remarks signal a clear tightening bias.