Bank of Korea Governor Lee Ju-yeol on Thursday once again signaled a rate hike within this year, as part of an "orderly" exit from the pandemic-led monetary easing policy.
"We have made it clear that from this year, we will adjust the current monetary easing policy. But the timing depends on the economic recovery, as well as inflation and other financial market conditions."
He agreed to the necessity of raising the record low key rate of half a percent due to the recent economic recovery, but insisted that rates won't be raised more than needed.
His remarks came during a briefing of the central bank's biannual report examining the country's overall inflation situation.
Here, he also said inflation in South Korea will continue to heat up in the second half of 2021, also on the back of the economic recovery.
While the consumer inflation rate at the beginning of this year fell far short of the government's target of 2 percent, it rapidly climbed to reach 2.6 percent in May, the highest since March 2012.
The central bank attributed the sharp increase to supply factors, and higher prices of agricultural products following last year's cold wave and avian influenza as well as the rise in global oil prices.
The BOK says, along with these factors, rising consumer demand following the economic recovery will further push up inflation.
However, it added that how long the higher inflation lasts for depends on several risk factors such as the price increases of agricultural products and the global inflation situation.
And it said if the pandemic lasts longer than expected, it could pull down consumption again, overturning the current inflation trend.
Kim Sung-min, Arirang News