November 8, 2017 / 6:04 AM / a year ago

BOK member says policy adjustment will be gradual, factor in domestic recovery

SEOUL, Nov 8 (Reuters) - A South Korea’s central bank board member said on Wednesday the pace of monetary policy tightening will be gradual, and vowed to take into account economic growth and inflation in Asia’s fourth largest economy.

“Adjusting the ease of monetary policy is expected to be gradual, and the pace of it will be decided cautiously after considering the speed at which domestic consumption recovers and underlying inflation,” said Hahm Joon-ho, one of the seven board members at the Bank of Korea, in a press conference in Seoul.

Hahm, known to have a neutral view on policy among central bank board members, said households and businesses should be prepared for higher interest rates, which could increase debt payment burdens.

Hahm’s comments come as analysts see the BOK likely to raise interest rates for the first time in over six years at its Nov. 30 meeting, as the economy rides an unexpectedly robust exports cycle on strong demand for memory chips.

However, weaker-than-expected inflation remains a caveat to such a view, with consumer prices having risen at their slowest pace in 10 months in October.

Hahm said small adjustments in policy rates wouldn’t necessarily affect consumer prices.

“The underlying (inflation) trend won’t be affected by micro-adjustment of policy rates,” Hahm told reporters. “This is because the pace of economic recovery and demand-side price pressure determine the inflation rate.”

Reporting by Cynthia Kim; Editing by Sam Holmes

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