Global Market: Bank of Korea signals data-driven approach to further rate hikes

A Bank of Korea board member said on Tuesday that the central bank will determine the timing and pace of further interest rate hikes by closely monitoring inflation, economic growth and financial stability, Reuters reported.

Chang Yong-sung said financial stability conditions would be shaped by factors including accumulating financial imbalances, improvements in sector-specific incomes, global market trends and geopolitical risks, according to remarks released alongside the central bank's financial stability report.

Reuters reported that Chang also stressed the need for monetary and macroprudential policies to work together to prevent financial imbalances from worsening. He also called for coordination with fiscal and financial authorities to address difficulties faced by vulnerable groups.


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The comments come after the BOK raised its benchmark interest rate by 25 basis points to 3.00% on August 27, delivering its second consecutive rate hike. The move came as inflation remained above the central bank's target and financial stability risks persisted.

The BOK's latest remarks suggest that future policy decisions will remain dependent on incoming economic and financial data, with policymakers weighing price pressures and growth alongside risks to financial stability.

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The central bank has been balancing persistent inflation pressures against concerns over household debt, property markets and broader financial imbalances. Policymakers have indicated that tighter financial conditions may be needed to contain risks, while avoiding excessive pressure on economic activity.

Reuters reported that the BOK is also closely watching global financial market developments, including changes in major central banks' monetary policies, as these could affect capital flows, the won and domestic financial conditions. Geopolitical uncertainties are another factor that could influence the outlook for inflation and financial stability.

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