[DigitalToday Online Team] Yoo Sang-dae (유상대), deputy governor of the Bank of Korea, publicly mentioned the possibility of a rate hike. Yoo said at a briefing with reporters in Samarkand, Uzbekistan on May 3 local time that it was time to consider stopping rate cuts and raising rates.

He is visiting the country to attend the Asian Development Bank (ADB) annual meeting and the ASEAN finance ministers and central bank governors meeting. It is the first time in recent months that Yoo, an ex officio member of the Monetary Policy Board, has mentioned a rate hike in public remarks.

Yoo said that after the Middle East war, growth fell less than feared while prices rose more than expected. He said that at the time of the April decision to keep rates unchanged, he had said the war’s impact could require lowering the growth outlook and raising the inflation outlook, but since then growth was unlikely to fall far below the original forecast of 2.0 percent while the chance that inflation will rise above 2.2 percent has increased.

He added that the semiconductor cycle is working strongly, improving growth led by exports, and that consumer sentiment has revived on government stimulus measures. On inflation, he said it is facing significant upward pressure even after considering the government’s response.

Yoo said it was his personal view that depending on external shocks and economic conditions, the cycle may now shift from rate cuts to rate hikes.

Asked whether the May 28 Monetary Policy Board meeting could send a signal of a rate hike, he replied that the possibility was open. But he said uncertainty is high and the board will watch conditions until the end of May before deciding, adding that if the current economic conditions persist, the six-month rate outlook distribution, or dot plot, could shift upward overall from February.

On the won-dollar exchange rate, he said it is clearly higher than in the past in terms of fundamentals, but added that the market does not seem to view the exchange rate as a major problem. The exchange rate has recently been fluctuating around 1,470 to 1,480 won.