Bank of Korea Gov. Rhee Chang-yong said Wednesday that the central bank will continue its monetary easing cycle but the scope and pace of any future rate cuts, as well as a possible policy shift, will depend on incoming economic data.
Rhee made the remarks in an interview with Bloomberg TV in Singapore, which was interpreted as hawkish and pushed the yield on 10-year government bonds to the highest level in 16 months.
"Given the negative output gaps, our official position is that we will maintain the easing monetary cycle," Rhee said. "But the magnitude and timing of the cut, or even the change of direction, will depend on the new data that we'll see."
His comments come as market watchers focus on the BOK's monetary path. The central bank kept its benchmark interest rate unchanged for a third consecutive meeting in October to ensure financial stability amid a red-hot housing market and a weakening won.
The BOK's monetary policy board is scheduled to hold its final rate-setting meeting of this year on Nov. 27.
Last month, four out of the board's six members indicated they were open to another rate cut within the next three months, down from five members in August.
"We will have a new economic growth forecast released two weeks later and we'll see how much it's going to be. I mean there's upside potential. So how much it's going to be revised, and after that, we probably have to decide how we're going to adjust our monetary policy," Rhee added.
The BOK expected the economy to grow 0.9 percent in 2025 and 1.6 percent next year, with a revised outlook scheduled for release later this month.
Rhee's remarks were seen as hawkish, pushing the yield on 10-year government bonds up 0.108 percentage point to 3.300 percent, its highest level since July last year.
In response, BOK officials said Rhee's remarks do not imply that a rate hike is under consideration and the central bank will review whether to maintain its easing stance based on the November economic outlook.
Speaking of the constant weakening of the Korean won in recent weeks, Rhee said there are "so many factors at this moment," ranging from volatility in artificial intelligence (AI)-related stock prices in the United States, the shutdown of the U.S. government, the Federal Reserve's monetary stance and the tariff agreement between Seoul and Washington.
"I think I need to see the fog to clear before we see the new direction. But as you mentioned, I think our market, in my personal opinion, is excessively sensitive to those uncertainties," Rhee said, noting that South Korea's foreign currency debt level and the overall market conditions remain stable.
"Because of the large movement of the resident portfolio, however, there is volatility in the exchange rate itself and it can be excessive but we have to see," Rhee said. "When we see the excessive movement, we are willing to intervene."
On Wednesday, the won was quoted at 1,465.7 per dollar as of 3:30 p.m., marking the weakest level since April 9, when it closed at 1,484.1 won. (Yonhap)
