Bank of Korea Governor Shin Hyun-song (신현송) again signalled the need to raise the benchmark interest rate, saying monetary policy is clearly pointing in one direction.

In a speech marking the bank's 76th anniversary on Thursday, Shin laid out tasks for the second half and said there is a need to raise interest rates before it is too late, with a focus on price stability.

He assessed the domestic economy as seeing growth expand sharply, helped by strong semiconductor exports driven by the global spread of AI.

He said inflation burdens are rising. With the impact of higher international oil prices taking full effect as the war in the Middle East drags on, the consumer price inflation rate rose into the 3 percent range in May, while core inflation increased to the mid-2 percent range, he said.

Shin pointed out that the rise in living costs is outpacing consumer prices and could affect households' inflation expectations.

On financial stability, he cited the housing market, household debt and an expansion of leveraged investing as risk factors. He said sale prices and jeonse and monthly rent prices have continued to rise in the capital region's housing market, and so-called debt-funded stock investing has also surged during the stock market's rise. As a result, the increase in household loans in May also expanded sharply, he said.

On the foreign exchange market, he said if exchange-rate volatility persists depending on developments in the Middle East situation, it could raise inflationary pressure through higher import prices.

Shin said the growth, inflation and financial stability situation is pointing relatively clearly in one direction from a monetary policy perspective, adding that policy trade-offs are not large at present.

He added that the burden from rising prices is relatively greater among low-income groups, and stressed that pre-emptive efforts to stabilise prices are a way to prevent their burdens from increasing.