Bank of Korea to prioritize inflation in monetary policy operation

Finance Minister Choo Kyung-ho, center, and Bank of Korea Gov. Rhee Chang-yong, second from right, at the joint meeting held in central Seoul on Thursday. [YONHAP]

The Bank of Korea announced it would prioritize inflation in its monetary policy operation, indicating it may raise its interest rate by 50 basis points depending on the economic situation over the next month.

Bank of Korea Gov. Rhee Chang-yong said he agrees with Finance Minister Choo Kyung-ho on the need for the bank to focus on easing inflation in monetary policy operation at a joint meeting held in central Seoul on Thursday.

The meeting was co-attended by the finance minister and Financial Supervisory Service chief Lee Bok-hyun.

“Taking a ‘big step’ is a matter that should be decided following the market response by the next monetary policy board meeting,” Rhee said. “There’s three to four weeks until the next meeting, during which a lot of changes can happen.”

The next board meeting takes place on July 13.

Rhee added, holding an emergency board meeting in June “has not yet been considered.”

The Thursday meeting followed the Federal Reserve’s 75-basis point increase of its interest rate on Wednesday, the most aggressive rate hike since 1994. Fed Chair Jerome Powell said a 50 or 75 basis points rate hike will be likely at the next central bank policy meeting scheduled next month.

The U.S. benchmark funds rate now stands at a range of 1.5 percent to 1.75 percent.

The Bank of Korea raised the base rate by a quarter percentage point to 1.75 percent in May.

BY JIN MIN-JI [jin.minji@joongang.co.kr]