SEOUL, Aug 4 - Board members of South Korea's central bank said they would carefully set the timing and speed of any further policy tightening, with a number of members arguing for preemptive steps, according to the minutes of their July 16 meeting released on Tuesday.
The seven-member monetary policy board voted unanimously to raise interest rates at that meeting - the first increase in three and a half years - and indicated that additional hikes could follow as brisk economic growth in Asia's fourth-largest economy continued to heighten inflationary risks.
One member noted that "the current rate increase alone was unlikely to be sufficient to bring inflation back to target and that the Base Rate would therefore need to be raised further in line with the projected paths for growth and inflation," the minutes said. The same member added that "the pace of further rate increases should be determined by reassessing the projected paths and the magnitude of the associated risks as new information became available, while weighing the benefits and costs of a more pre-emptive approach against those of a more gradual approach."
Another member urged that the primary focus should remain on curbing inflation and stressed that preemptive monetary policy action was necessary to consolidate the trend toward price stability.
Those comments appeared against a backdrop of fresh data released earlier in the day showing South Korea's consumer inflation eased to a three-month low in July, coming in below market expectations as oil prices fell. Despite the softer reading, the minutes show policymakers remained cautious about upward pressures, and markets have not discounted the possibility of a second consecutive rate increase this month.
Board members highlighted several factors they said needed close monitoring when deciding on future moves. They pointed to upside inflation pressures originating from both cost and demand channels, improvements in overall economic activity, movements in foreign exchange rates, and the level of household debt.
Members also identified risks tied to energy supply chains and noted domestic spillovers from a boom in chip exports. In addition, the minutes recorded concerns about increased liquidity flowing into asset markets, which could interact with monetary policy developments.
Overall, the minutes portray a board balancing the need to contain inflation against the costs of tighter policy, with some members leaning toward more preemptive action and others favoring reassessment as new information arrives.
Contextual considerations - While the board has already moved to raise the Base Rate, its members signalled that further adjustments will be conditioned on evolving projections for growth and inflation, as well as developments in external and domestic risk factors.