Key facts
- Four of six Bank of Korea Monetary Policy Board members supported a further rate hike in July.
- Two board members favored monitoring economic indicators or emphasized fiscal policy.
- The BOK raised its benchmark rate to 3.00% on August 27, marking a second consecutive increase.
Minutes from the Bank of Korea's August monetary policy meeting revealed that the decision to implement back-to-back interest rate hikes was more contentious than initially suggested. The central bank raised its benchmark interest rate by a quarter percentage point to 3.00% on August 27, marking its second consecutive increase amid persistent inflation and financial stability risks.
According to the minutes released on Tuesday, four of the six Monetary Policy Board members, excluding Governor Shin Hyun-song, explicitly supported the need for further rate hikes. They cited improvements in corporate investment and household income, as well as the pass-through effect from exchange rates, arguing that a slowdown in core inflation could be delayed. These members' remarks averaged 1,761 characters in length.
In contrast, two members adopted a more moderate stance, indicating a desire to further monitor real economy and price indicators or emphasizing the role of fiscal policy. Their remarks averaged 735 characters. A senior financial industry official suggested that these differing lengths and content indicated a divergence in views on additional hikes.
Even with the governor and the executive department leaning towards a rate increase, cautious views were already present within the board. Data released after the July meeting, including a 15.6% year-on-year rise in second-quarter real gross domestic income and a 31-month high in July core inflation at 2.6%, bolstered expectations for a consecutive hike. Governor Shin had previously described upcoming meetings as "live meetings," leaving the door open for further increases. However, potential decreases in international oil prices and the exchange rate could weaken the justification for future hikes, potentially intensifying debate within the board.