Will High Interest Rates Continue? Monetary Policy Committee Members Say "Maintain Tightening Until Price Stability"

Lee Chang-yong, Governor of the Bank of Korea (third from the right), is presiding over the Monetary Policy Committee meeting held at the Bank of Korea in Jung-gu, Seoul, on January 11. Photo by Joint Press Corps

Members of the Monetary Policy Committee of the Bank of Korea stated that the tightening stance should be maintained until there is confidence in price stability. The likelihood of high interest rates continuing for a considerable period has increased.

However, mentions of additional tightening that continued until November last year have disappeared, suggesting that there will be no further base rate hikes.

According to the minutes of the Monetary Policy Committee meeting held on January 11, released by the Bank of Korea on the 30th, one member said, "It is necessary to maintain the tightening stance until there is confidence that inflation is settling at the target level," adding, "Past experience shows cases where efforts made at the cost of prolonged pain were wasted when inflation was not stabilized."

Another member stated, "Although prices are expected to continue a trend of gradual slowdown, they still significantly exceed the target level (2%), and uncertainty about the future inflation path remains," and added, "While recent inflation expectations have somewhat decreased, since it is expected to take a considerable time for inflation to settle at the target level, it is desirable to keep the base rate frozen at 3.5%."

Another member also argued, "Until the uncertainty regarding the inflation outlook is sufficiently resolved, we should closely monitor the movements of key indicators in the inflation trend and the transmission path of monetary policy while maintaining the tightening stance."

However, the necessity for additional monetary tightening, such as base rate hikes, was no longer mentioned. There is a growing assessment that further base rate increases are unlikely.

This contrasts with the previous meeting in November last year, where some Monetary Policy Committee members expressed the view that "if inflation exceeds the currently expected path and the stabilization at the target level is delayed, additional tightening should be considered."

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