SEOUL, Aug 4 (Reuters) – Board members of South Korea’s central bank said they would carefully determine the timing and pace of any further policy tightening, with some suggesting preemptive action, when they raised interest rates at their last meeting on July 16 to control inflation, the minutes showed on Tuesday.
The Bank of Korea’s seven-member monetary policy board decided unanimously to raise interest rates last month for the first time in 3-1/2 years and flagged more to come, as brisk growth in Asia’s fourth-largest economy fanned inflation risks.
One member assessed that “the current rate increase alone was unlikely to be sufficient to bring inflation back to target and that the Base Rate would therefore need to be raised further in line with the projected paths for growth and inflation,” according to the minutes.
“The pace of further rate increases should be determined by reassessing the projected paths and the magnitude of the associated risks as new information became available, while weighing the benefits and costs of a more pre-emptive approach against those of a more gradual approach,” the member said.
Another member also said primary emphasis should be on inflation, while emphasising preemptive monetary policy action was needed to consolidate the trend toward price stability.
Earlier in the day, data showed South Korea’s consumer inflation softened to a three-month low in July, coming in below market expectations on a fall in oil prices, though policymakers remained wary of upward pressures and markets did not rule out a possible back-to-back rate hike this month.
Among other factors to be carefully assessed, board members noted upside inflation pressure stemming from both cost and demand sides, improvements in economic activity, as well as foreign exchange rates and household debt.
They also mentioned energy supply chains, domestic spillover effects of a boom in chip exports and increased liquidity flowing into asset markets.
(Reporting by Jihoon Lee; Editing by Christian Schmollinger and Kate Mayberry)
