BOK official suggests potential shift from rate cuts to hikes amid strong growth, inflation pressure

The Bank of Korea's (BOK) deputy governor, Ryoo Sang-dai, speaks at a forum co-hosted by the Korean Statistical Society at the BOK headquarters in Jung District, central Seoul, on Sept. 9, 2025. A senior Bank of Korea (BOK) official signaled that the central bank may need to stop cutting rates and begin considering hikes, as stronger-than-expected growth and rising inflation pressures shift the policy outlook. “It is time to stop rate cuts and think about hikes,” Ryoo Sang-dai, BOK’s senior deputy governor, said after attending the Asian Development Bank annual meeting in Samarkand, Uzbekistan, on Sunday. The remarks suggest the BOK is turning more hawkish ahead of its May 28 rate-setting meeting. A rebound in semiconductors has eased fears of a sharper slowdown, while inflation risks have grown after the outbreak of war in the Middle East. “It is my personal view that we may move toward a hiking cycle rather than cuts." Ryoo said the policy debate had shifted sharply in recent months. “The semiconductor cycle has been very strong, improving the economy mainly through exports, and government stimulus measures have also helped revive consumer sentiment,” Ryoo said. “Until the end of last year, there was also a sense within the Monetary Policy Board that if economic conditions held up, we could lower rates one more time and wrap up the rate-cut cycle,” Ryoo said. “But since the outbreak of the Iran war this year and other conditions have changed, our concerns have grown. “But looking at developments since April, the economic growth feels unlikely to come in below 2 percent, while inflation now appears likely to rise above 2.2 percent.” Asked what could prevent the BOK from shifting toward a hiking cycle at the May policy meeting, Ryoo said the central bank would continue to monitor whether the recent pattern holds. “The BOK sets rate policy based on its growth and inflation outlooks,” Ryoo said. “On top of that come financial imbalance and financial stability factors, and it has been confirmed that growth is unlikely to fall much while inflation is likely to rise significantly.” Asked whether the May 28 Monetary Policy Board meeting could send a signal that a rate hike may be possible later this year or beyond, Ryoo said that “There is a probability,” and added, “The possibility is open.” Ryoo also raised concerns about Korea’s growing dependence on semiconductors even as the sector drives current growth. “It is worrying what happens if the semiconductor cycle turns down when growth is now high because the semiconductor market is doing well,” Ryoo said. “In the past, when semiconductors were doing well, there was a spillover effect into domestic consumption and construction, but these days that effect seems weaker, and that is also concerning.” He also pushed back on the Organisation for Economic Cooperation and Development’s forecast that Korea’s potential growth rate will fall from 1.71 percent this year to 1.57 percent next year. "A figure suggesting it will fall as low as 1.57 percent seems somewhat excessive," he said. The deputy governor also commented on the internationalization of the won. “What matters more than whether regulations are eased is whether foreign use of the currency actually increases," he said. On the won-dollar exchange rate, Ryoo said the market does not appear to see the current level as a major short-term problem. “For now, the market does not seem to think the won-dollar rate at 1,470 won to 1,480 won is a very serious problem,” Ryoo said. “When the exchange rate is high, people often worry that Korea’s foreign currency liquidity may be worsening, but I understand that is not the case,” Ryoo said. “Looking at fundamentals such as the current account surplus, price levels and growth, it is clearly true that the exchange rate is high compared to the past.”