사진 확대
While the market’s attention is focused on the first speech of U.S. Federal Reserve Chairman Kevin Wash’s Jackson Hole meeting, Bank of Korea Governor Shin Hyun-song (photo) will also be on the stage for the first time since taking office. Governor Shin has attended Jackson Hole meetings several times in the past, including when he was an economic adviser to the Bank of International Settlements (BIS), but this is the first time he will attend as governor of the Bank of Korea.
According to the Bank of Korea on the 24th, the Bank of Korea’s Monetary Policy Committee will hold a monetary policy direction decision meeting on the 27th and decide whether to adjust the benchmark interest rate, which is currently 2.75% per year. The central bank raised its key interest rate by 0.25 percentage point to 2.75 percent from 2.50 percent last month. It is the first time in three and a half years that interest rates have been raised.
After the plenary session of the Monetary Policy Committee on the 27th, President Shin will leave for the United States on the afternoon of the same day to attend the Jackson Hole meeting.
Growth and price indicators are putting more weight on the theory of further increases. Real GDP rose 0.6 percent in the second quarter from the previous quarter, showing a stronger-than-expected trend, while core inflation, excluding food and energy, also rose to 2.6 percent in July, higher than the previous month’s 2.5 percent. In its revised economic outlook in May, the Bank of Korea presented this year’s growth and consumer price growth rates of 2.6 percent and 2.7 percent, respectively. The Korea Development Institute (KDI) also recently raised its growth forecast for this year from 2.5% to 3.2%. This is higher than the government’s forecast of 3.0%.
사진 확대
As the growth rate of the second quarter exceeded expectations due to strong semiconductor exports and facility investment, the possibility of further growth in the economic outlook for August has also increased.
As a result, the capital market seems to be weighing on the possibility of a second consecutive month of increase in the benchmark interest rate at the Monetary Policy Committee in August. Citi, a U.S. investment bank (IB), maintained its previous forecast that an additional 25 basis points (1bp = 0.01 percentage point) will be raised at the Monetary Policy Committee this month, saying in a recent report that Governor Shin is expected to put more emphasis on core price flows when judging underlying price pressures.
However, some observers say that the Bank of Korea will freeze its key interest rate this month and watch the situation until the next Monetary Policy Committee. “The recent growth is led by the export and trade sectors, but domestic demand is still sluggish,” said Kang Tae-soo, a special researcher at the Korea Business Association (former vice president of the Bank of Korea). “Rising interest rates gain traction when domestic demand overheats and price pressures increase, but private consumer players such as small business owners and self-employed people do not feel the economic recovery.”
British investment bank Barclays also maintained its forecast that its benchmark interest rate would be frozen at the Monetary Policy Committee in August. Barclays predicted that the Bank of Korea will freeze interest rates in August, but leave the possibility of a hike in October strong.
Analysts say that the Bank of Korea is likely to remain cautious rather than aggressively raising interest rates as consumption and labor market indicators are limited and the burden of rising delinquency rates is increasing.
On the 27th, a dot plot containing the interest rate outlook of the Monetary Policy Committee members will also be released. The dot plot shows opinions on the appropriate interest rate at the time of the Monetary Policy Committee in February next year. The market generally expects forecasts to be concentrated in the 3.25% and 3.5% sections.
Another point to watch is how Governor Shin will change the BOK’s monetary policy communication. This is because Governor Shin’s awareness of the problem, who has been paying attention to the side effects of excessive communication, can be reflected. Recently, the Financial Times (FT) analyzed that Governor Shin pointed out in his past paper that excessive communication by central banks can reduce the information function of market prices and expand financial market leverage.
Earlier, since taking office, Wash has been reducing policy signals to the market by abolishing forward guidance on future interest rate directions and simplifying the Federal Open Market Committee (FOMC) statement.
[Reporter Kim Jung Beom]