Bank of Korea Senior Deputy Governor Signals Potential Rate Hike on Strong Growth
Ryoo Sang-dai says it's time to stop rate cuts and consider hikes as economy expands 1.7% in Q1, fastest in 5.5 years
Quick Look
- Ryoo Sang-dai, senior deputy governor of the Bank of Korea, has signaled the possibility of a rate hike, citing better-than-expected economic growth of 1.7 percent in Q1 — the fastest quarterly expansion in 5 1/2 years — driven by strong semiconductor exports.
- This marks the first time a BOK monetary policy board member has indicated a shift away from rate cuts, with inflation potentially exceeding 2.2 percent.
- The central bank will hold its next policy meeting on May 28, chaired by new Gov.
AI-generated summary
Why It Matters
The Bank of Korea has maintained a cautious stance since late 2025, holding rates steady at 2.5 percent for seven consecutive sessions amid Middle East tensions and inflation concerns. The unexpected Q1 growth surge driven by semiconductor exports has shifted the policy calculus.
SEOUL, May 4 (Yonhap) -- Ryoo Sang-dai, senior deputy governor of the Bank of Korea (BOK), has said it is time to consider a rate hike, citing the country's better-than-expected economic growth in the first quarter. The comment comes despite the economic uncertainties caused by the ongoing conflict in Iran.
"When we held the key rate in April, we noted that the war might force us to lower our growth forecast and raise our inflation forecast," Ryoo was quoted as saying Sunday (local time) in pool reports while visiting Samarkand, Uzbekistan, for an annual meeting of the Asian Development Bank (ADB) and other regional events. "Since then, we are seeing economic growth not falling much below 2 percent, while inflation can exceed 2.2 percent. Given that, it is time to stop rate cuts and start thinking about rate hikes."
It marks the first time a member of the BOK's seven-member monetary policy board has signaled the possibility of a rate hike. Last month, the central bank held the key interest rate steady at 2.5 percent for the seventh consecutive session, citing Middle East uncertainties and adopting a cautious stance amid risks to inflation, currency and growth.
Subsequent data showed that South Korea's economy expanded 1.7 percent in the first quarter from three months earlier, marking the fastest quarterly growth in 5 1/2 years, driven by strong semiconductor exports. The BOK had earlier projected 0.9 percent growth.
Ryoo said the ongoing semiconductor boom is supporting the export-driven economy, while inflationary pressures remain elevated despite the government's recent measures to curb consumer prices, including nationwide fuel price caps.
The BOK will hold its next monetary policy meeting on May 28, the first to be chaired by new BOK Gov. Shin Hyun-song, who took office last month.
What to Watch
AI outlook — possibilities, not facts
BOK holds rates steady at May 28 meeting but signals hawkish tilt
Likely · Within weeks
BOK may begin rate cuts cycle reversal in Q3 2026 if inflation stays elevated
Possible · Within months
Open Questions
- Will the BOK actually raise rates in May?
- How will the new Governor Shin Hyun-song approach monetary policy?
- Will inflation exceed 2.2 percent as projected?
- How will the Iran conflict developments affect the BOK's decision?
