BOK underlines need to maintain monetary tightening as inflation could stay high

The Bank of Korea (BOK) on Thursday underlined the need to maintain its monetary tightening "for the time being" to bring down inflation that is expected to stay much higher than its target level.

"Since it is expected that inflation will stay much higher than the target level even if the economy growth slows, it is necessary to continue the upward trend of interest rates for the time being," the BOK said in a report submitted to lawmakers briefing on latest economic and financial market conditions.

The BOK forecast that consumer prices, a key gauge of inflation, will grow at a moderated pace "steadily" due to downward pressure on the economy but they will stay in the 5 percent range for some time.

The central bank has hiked its key policy rate nine times and by a combined 2.75 percentage points since August last year to combat inflation that has been driven up by soaring energy bills, supply disruptions and growing demand bolstered by the global economy reopening from the pandemic.

The rate stays at 3.25 percent, and market watchers predict that the terminal rate of the current rate hike cycle could rise to as high as 3.5 percent.

The country's consumer prices rose 5 percent in November from a year earlier, slowing from a 5.7 percent rise tallied in October.

Price growth has been moderating after rising as high as 6.3 percent in July, the highest in about 24 years.

Yonhap