Bank of Korea also mentions 'inflation' 60 times... Will interest rates rise again?

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] As the last Monetary Policy Committee (MPC) meeting during the term of Lee Ju-yeol, Governor of the Bank of Korea (BOK) (photo), is scheduled for the 24th, market attention is focused on the possibility of a base interest rate hike.

Although the prevailing view is a 'pause' after three consecutive rate hikes?two last year and one last month?the possibility of a surprise hike to curb soaring inflation cannot be completely ruled out.

In particular, since the keyword highlighted by the U.S. Federal Reserve (Fed) at last month's Federal Open Market Committee (FOMC) meeting and the keyword noted by the BOK at last month's MPC meeting are both 'inflation,' there is speculation that the BOK's actions may accelerate.

On the 17th, Asia Economy analyzed the keywords from the minutes of the BOK's first MPC meeting of the year (January 14), released on the 3rd, and found that the word 'inflation' appeared 60 times?12 more times than in the MPC meeting on November 25 last year, when a 25bp (1bp=0.01%) rate hike was implemented.

Notably, the January MPC minutes included the term 'expected inflation' 31 times, with many MPC members emphasizing the need to manage it. One MPC member stated, "Recently, core inflation, consumer price inflation, and expected inflation rates have risen simultaneously," adding, "The simultaneous increase in dining-out costs also seems related to the effects of expected inflation, making its management more important than anything else."

Furthermore, the term 'price increase' was mentioned 25 times, and 'price' appeared 151 times in the January minutes, reflecting concerns about the current price situation.

Considering that in the November MPC minutes last year, the terms 'price increase' and 'expected inflation' appeared 15 and 14 times respectively?about half the frequency of January this year?it is interpreted that recent inflation concerns have surged, increasing the necessity for a rate hike.

However, experts emphasize that since the BOK took preemptive measures by raising the base rate three times?in August and November last year and January this year?it is likely to maintain the current level in February to observe the ripple effects.

Professor Kim So-young of Seoul National University's Department of Economics said, "While the possibility of a rate hike at the MPC meeting on the 24th cannot be completely ruled out, given that the base rate has been raised three times consecutively domestically, it is likely to take a wait-and-see approach in February."

Professor Kang Sung-jin of Korea University's Department of Economics added, "With the presidential election issue next month and the recent surge in Omicron cases nearing 100,000, the incomplete recovery from COVID-19 will act as a burden against a rate hike."

This content was produced with the assistance of AI translation services.