Governor of the Bank of Korea: “Buying time by preemptively raising interest rates… ultimately reducing costs.”

Bank of Korea Governor Shin Hyun-song said on the 12th regarding the effect of consecutive base rate hikes in July and August, “I think we have bought time.”

Governor Shin said this at the National Assembly's Financial and Economic Planning Committee audit held at the Bank of Korea in Jung-gu, Seoul this morning, saying, "We set our monetary policy stance a little earlier than other major countries in the direction of raising interest rates."

He said, “(The increase in the base rate) was fully reflected in the market price this summer, especially for a significant part of May and June,” and added, “By moving in advance, we were able to provide guidance to the market and have the effect of preventing larger changes later.”

He continued, “At the time, I used the expression of blocking with a hoe what was blocked with a phlegm,” and added, “I think the economic cost is much lower than a situation where the interest rate is raised defensively after being driven out by the market.”

Governor Shin emphasized, “Korean government bond interest rates have remained fairly stable over the past two to three weeks,” adding, “There is pain when raising the base interest rate, but I believe that by making a preemptive move, we can stabilize the market and reduce the ultimate cost.”

Regarding U.S. Federal Reserve Chairman Kevin Warsh's negative attitude toward forward guidance, Governor Shin said, "There are pros and cons," and reiterated that the Bank of Korea's Monetary Policy Committee will maintain the current system, including the dot plot, for the time being.