S.Korea central bank governor says inflation likely to stay around 5% through Q1

The headline inflation of South Korea is likely to stay around 5 per cent through the first quarter of next year, which would warrant further increases in interest rates, central bank governor Rhee Chang-yong said on Friday.

Inflation in the 5 per cent range could last through the first quarter of next year, Rhee said, responding to a question at a parliament session in Seoul.

We look at supply and demand inflationary pressures but interest rates should increase if inflation stays above 5 per cent. Expectations are increasing, for a 50 basis point hike in the key interest rate to 3.00 per cent when the Bank of Korea reviews policy at its Oct. 12 meeting.

Rhee has kept the door open for a tightening through the first half of next year, and analysts believe that the base rate will peak at 3.50 per cent in the first quarter of 2023.