A senior central bank official warned Thursday that the nation’s economy has stubbornly refused to contract, leaving policymakers with no choice but to forcefully correct the situation by raising interest rates.
SEOUL — The Bank of Korea indicated it is prepared to raise its benchmark interest rate after deeply troubling new data revealed that the country's economic growth has failed to collapse as the central bank had previously projected.
According to an internal review circulated among policymakers this week, South Korean households and businesses have maintained a frustrating level of resilience. Despite the bank's best efforts to cool demand over the past year, inflation remains above target simply because consumers have not yet fully abandoned the practice of purchasing everyday goods.
We asked the public nicely to stop being able to afford things, but recent macroeconomic data shows they are still successfully paying for goods and services.
The central bank had previously held its key rate steady in the explicit hope that consumers would run out of money on their own. With recent retail and labor figures suggesting that citizens are still finding ways to generate income and feed their families, officials acknowledged that a more direct intervention is required to bring economic output back down to an acceptable level of stagnation.
The monetary policy board will convene next month to determine exactly how high borrowing costs must rise to ensure the nation's financial trajectory finally points downward.